Jun 16 2008
Will The Greenback Continue Its Bullish Path?
The Greenback saw substantial growth last week versus a basket of it currency rivals, most notably against the Euro. The USD gained nearly 500 pips versus its cross-Atlantic counterpart, as the oft-traded EUR/USD pair saw its biggest rise in 3 years. Forex Investor confidence in the greenback grew as the week progressed as US officials continually pushed a hawkish stance regarding monetary policy, as well as shooting down talk of the troubles within the US economy. Dollar bullishness escalated on Thursday after Retails Sales saw a larger than expected rise, at 1.2% for the month of May. Momentum carried the dollar into the weekend despite Friday’s release of the Preliminary Michigan Statement. The report which measures consumer confidence showed that American consumer confidence dropped to nearly 30 year lows. But with a sharp rise in US inflation, a rise which will likely lead to an interest rate hike, as well as troubling news following the Irish vote of the EU Lisbon Treaty, the USD finished last week on a positive note.
As we look toward this week, investors look primed to continue to see a bullish dollar. The meeting of the G-8 leaders over the weekend, did little to veer the USD off of its latest path, even as foreign exchange was noticeably absent from talks. Much of the speculation surrounding the direction of the USD this week, is whether or not the talk of rising inflation in the US will curb sub-prime credit worries that have haunted the US economy and its trusty dollar. With a relatively light week of US news on tap, it is very possible that the bullish trend, all be it at a slower speed will continue. This week US news will be highlighted by Housing Starts, PPI, Industrial Production, Unemployment Claims and the Philadelphia Fed Manufacturing Index. Results are expected to mixed, and with the addition of key speeches by Federal Reserve officials Ben Bernanke and Donald Kohn, who will both likely defend the new hawkish US monetary stance, it could prove to be another significant week for the Greenback.
Today the US economy will provide some significant market making news as we expect the release of the Empire State Business Conditions Index (12:30 GMT), TIC Net Long-term Transactions (13:00 GMT) and to finish up the day a speech by Fed Chairman Ben Bernanke. Bernanke will address the Senate Finance Committee Health Reform Summit, where he is scheduled to discuss HealthCare reform, however with the current situation of the dollar, expect Bernanke to push the already bullish currency further.
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