Jul 16 2008
Crude Oil Inventories On Tap
The USD completed yesterday’s trading session with mixed results versus the major currencies. The news of the first half of the day surrounded the oft traded EUR/USD pair which hit record highs and peaked at 1.6035 before correcting back to just a bit less than 1.60. The USD slowly strengthened throughout the day, right up until the 14:00 GMT testimony of Fed Chairman Ben Bernanke. Bernanke along with Treasury Secretary Henry Paulson testified before the Senate Committee on Banking, Housing, and Urban Affairs and spurred market volatility almost instantaneously. Bernanke warned that high energy prices have helped limit the spending power of U.S. consumers. He reiterated that the high crude oil prices will likely add stress to the economy throughout the rest of the fiscal year. This led to the biggest drop in Light Sweet Crude prices since the George Bush Sr. presidency, nearly 17 years ago, as the highly traded commodity surfaced at just over $138/barrel. The USD began to strengthen shortly after and closed the trading day at 1.5910, more than 100 pips off of earlier highs in day.
Yesterday was also a big news day for the US as many conflicting indicator came to light. Retail Sales and Core Retail Sales grew a 0.1% and 0.8% respectively, far off expectations. The PPI index went up to 1.8% as Core PPI saw the second month of similar growth at 0.2%. Empire State Manufacturing Index rose to -4.9 from a previous reading of -8.7, Business Inventories came in with a change of 0.3%, and the IBD/TIPP Economic Optimism remained the same at 37.4. The aforementioned data did surprisingly little to move USD trends as most of the attention was put on Bernanke and Crude Oil prices.
Today will be another big news day for the greenback. Core CPI is forecasted to rise by 0.2% similar to last month and CPI should rise to 0.7%. The TIC Net Long-Term Transactions is set to decline to 70B and Industrial Production is expected to stay unchanged. The two big volatility events will likely come from the release of Crude Oil Inventories, which is expected to rise and yet another day of testimony from Bernanke and friends before the Senate Banking committee. Reading the indicators today does not give us a clear picture of future market movement for the USD.
Good news for Iraqi oil. In 2003 oil production fell to close to zero barrels produced a day. Recently oil production in Iraq rose to the previous level of 2.5M barrels day. As well the big oil companies are about to enter the Iraqi market which ought to increase production levels still further. Thus these actions can help retreat crude oil prices in the near future. As such it might help reduce inflation in the USA, consequently strengthening the USD.
My Forex Blog
