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Yesterday the EUR/USD par experienced a highly volatile trading session and ultimately closed at 1.5466. This closing price represented almost a 90 pip loss for the Dollar versus the Euro. Early morning trading in Asia added another 100 pip to the EUR/USD pair as it raced passed 1.55. In addition the greenback depreciated versus the rest of its major currency rivals yesterday as well. A possible explanation for the dollar’s decline can be found in yesterday’s issued reports on the economy. The Empire State Business Conditions Index came in much lower than expected. The index which measures the general business conditions of manufacturers in New York State came in at -8.7, nearly 8 points lower than initially forecasted. The NAHB Housing Market Index surprised many investors with a slight drop from the forecasted reading. Economists were surprised because they thought homebuilders had begun to recover from the subprime credit crisis that has ravaged the US economy. Also yesterday Federal Reserve (Fed) Chairman Ben Bernanke spoke in front of the Senate Finance Committee Health Reform Summit, where he addressed the poor state of the US HealthCare system. Surprisingly, Bernanke did not touch upon the state of the US economy or the monetary policy. On a positive note, TIC Net Long-Term Transactions were released at $115.1B. This event which measures the monthly difference in cross-border foreign and domestic purchases of long-term securities, returned much higher than the expected mark of $63.0B.

Today we can expect a batch of significant US calendar news. The most important of which will be the PPI index. The PPI measures the change in the price of finished goods and services sold by producers, and is expected to rise by 1.0% this month on the back of rising energy prices. Also expected to boost the USD is Industrial which is estimated to rise for the month of May. PPI and Industrial Production will likely have to combat negative news from Building Permits, Housing Starts and Core PPI. Housing Starts measures the annualized number of new residential buildings that began construction during the previous month. The index is expected to see a small decline from the already low figures from last month.

It is safe to say that the movement of the USD today will be largely dictated by its own local news. High volatility in the Currency Trading market in and around the release of PPI and Housing Starts (12:30 GMT) should be expected.

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