Sep 02 2008
The Greenback Steams Up After Labor Day
The USD saw a bullish trading session versus all of its major currency crosses yesterday. The USD took advantage of the falling Crude Oil Prices that reached a four month low and some bearishness by its counterpart currencies. Against the EUR, the USD reached its highest value in more than half a year as the pair traded under 1.46. The biggest gains for the USD were seen against the weak GBP as the two were traded in the low 1.79’s.
There were no economic data releases for the USD yesterday because of the Labor Day holiday and the closed markets, however much volatility was seen from the greenback. In Federal Reserve Governor Randall Kroszner’s speech yesterday, he noted that the influence of U.S. housing and financial problems on economic weakness elsewhere demonstrates how intertwined the world’s economies are and explained that the theory that the USD had become independent from the world’s economies is incorrect. The other main spark for the USD volatility was the larger than $4 drop in Crude Oil prices, which occurred as Hurricane Gustav hit the United States weaker than expected. Louisiana Governer Bobby Jindal estimated that roughly one fifth of the oil and natural-gas output that was shut prior to Gustav could be back on line by the weekend and no major damages have been reported by the oil companies thus far.
In terms of economic data, today will be a lot more interesting for the USD. There are 3 economic releases expected to be released at 2:00 GMT with the ISM Manufacturing PMI being the main release. As it measures the level of diffusion based on surveyed purchasing managers in the manufacturing industry, this index is expected to slight fall along with the ISM Manufacturing Prices. The other economic indicator, the Construction Spending, is expected to slightly rise compared to last month. Overall, it seems like trades should keep track of Hurricane Gustav’s developments and the three releases which are expected to add volatility to the USD trends with their mixed expected results.
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