The USD saw a bearish trading session yesterday. Although no impactful economic data was released, the USD was mostly affected by speculations. Impacting the greenback was the wary economic outlook from a Federal Reserve official and the possibility of more financial troubles of the Federal National Mortgage Association commonly known as Fannie Mae and Freddie Mac – the largest corporate funder in Washington. The USD lost value against its major crosses, most notably vs. the EUR as the cross was once again being traded at above the 1.57 range.
As stated previously, no economic data was released yesterday; however there was plenty of volatility in USD trading. Traders noted that the Crude Oil prices dropped quite dramatically to around $141 a barrel, however the USD did not strengthen. The main reason for the greenbacks weakness was San Francisco Federal Reserve Bank President’s speech regarding U.S. Interest Rate policy, in which she noted that since the worse-case scenarios for growth have been skirted by the Fed’s aggressive string of rate cuts, the Interest Rate policy is “nearing a crossroads”. She also said that that headline inflation is likely to run much higher than desired for the next few quarters. Further hurting the USD was Lehman Brothers analysts’ assessments that Fannie Mae and Freddie Mac may need to raise more capital as the credit crisis continues.
A batch of economic releases and announcements are expected for the USD today. The day will start with a speech by Fed Chariman Bernake regarding financial regulation and stability at the Federal Deposit Insurance Corporation’s Forum on Mortgage Lending. Volatility will continue after Bernake’s speech as Pending Home Sales are forecasted to be released at a negative rate and hurt the USD. Wholesale Inventories are expected to slim down, which should help the USD as companies are more likely to purchase goods when they have depleted inventories, but then Consumer Credit is expected to decrease and once again depreciate the USD. Overall, traders might expect the USD to further devalue against its top currency rivals with a weak economic data releases expected today.
