The Greenback Still Roams Bearish Grounds

Yesterday the greenback weakened sharply all across the board on the back of the release of the FOMC Meeting Minutes. The greenback slipped to new all time low against the EUR touching the 1.4852 mark, as the minutes gave another strong indication to the market that the Fed will once again cut rates in order to prevent the U.S economy from slipping into recession. The Fed indicated that it expects U.S growth to slow to between 1.8 and 2.5 percent, which is much lower than previous forecasts. Therefore the Fed is now expected to cut rates by at least 0.25%, in order to stimulate growth by attempting to alleviate the housing and credit crisis.

However the dollar selling began well before the FOMC Minutes with the release of weaker than expected Building Permits figure. This figure was forecasted to come in at 1.20M but it released at 1.18M, showing a sharp drop from last month’s figure of 1.26M. This downside surprise increased the pressure on the greenback as it indicated that the earlier rate cut by the fund is struggling to provide the housing slump with some reprieve and it raised concerns of curbing future economic growth. There was some positive news for the greenback as the Housing Starts figure released better than expected, but this was greatly overshadowed by the negative Building Permits figure and by the FOMC Minutes. The weakness of the dollar yesterday also caused commodities to become more appealing to investors and this shoved Crude Oil passed the key $99 mark. The rising price of oil coupled with the continued subprime crisis will put immense pressure on the U.S economy. However the weak dollar may cause exports to boom as U.S exporters become more competitive on the global market.

Looking ahead to today, the most important news to be released from the U.S will be Unemployment Claims, which is expected to release slightly weaker than last month and Consumer Sentiment, which is forecasted to remain unchanged. If these figures do not cause any major surprises then the greenback should consolidate today after dropping to record lows yesterday. However the dollar sentiment is still very bearish and this is not likely to change in the near future, particularly since many analysts believe that it is in the Fed’s interest to maintain a weak dollar.

Looks Like Another Rate Cut Is Imminent

The greenback range traded yesterday against the EUR and the Sterling on a day which was relatively devoid of significant economic data. The main U.S news release of the day was the NAHB Housing Market Index which came in slightly better than the expected figure of 17. This Index measures the demand outlook of single-family home builders, and the improved figure is a positive sign for the housing sector. Although the greenback was relatively stable against the EUR and the Sterling yesterday, it did strengthen sharply against the higher yielding currencies on the back of a noticeable carry trade unwind. The carry trade unwind was mainly driven by the risk averse attitude of investors which resulted from concerns of further problems in the troubled global financial sector and consequent falls in equity markets. Usually the risk-averse sentiment tends to benefit the greenback as investors seek a “safe-haven” for their funds. Now although the greenback did gain, it did not benefit as much as it should have indicating that it is beginning to lose its safe-haven status.

Looking ahead, later on today we are expecting the Housing Starts and Building Permits figures which will shed more light on the status of the troubled U.S housing sector. Both figures are forecasted to release weaker than last month, but there is strong possibility of an upside surprise as last months rate cut by the Fed should have provided the housing sector with some reprieve. Also due out today have the FOMC Meeting Minutes which will provide detailed insights regarding the FOMC’s stance on monetary policy. Investors will be paying close attention to this report as they will comb it for hints regarding future interest rate changes. If yesterday’s strong risk-aversion sentiment persists then we will see the greenback continue to gain against the high yielders, while on the other hand dropping sharply against the JPY. It may also experience some volatility today against the EUR and the Sterling if the FOMC Minutes are dovish with regards to future monetary policy.

The USD Uncertainty Continues

We open the week of November 18th, with what has become a familiar trend; the dollar continues to fall. The greenback finished off trading on Friday down against most major currencies as credit and housing worries continue to haunt the US economy. Figures from the Department of Treasury regarding International Capital, Balance of Payments, and Industrial numbers hindered any hopes of the greenback gaining on its progress from early last week. Instead, investors start the week offering the greenback in bulk. Another hit to the dollar came this weekend as the Gulf Cooperation Council, made up of the lion’s share of the Gulf States, discussed the possibility of revaluating their currencies away from the greenback. This has become a developing trend as China leaked several hints that they were doing the same, not too long ago.

The greenback this week will have to rely more heavily than usual on outside events, as the shortened Holiday week holds little relevant news in the US economic schedule. Tuesday will see the release of the FOMC meeting minutes which should highlight any suspicion about if and when the Fed will intervene once again to change the economic outlook of the dollar.

US Housing will look to be a notable subject this week with two statements set to be released. Today at 18:00GMT, we will see the release of the National Association of Home Builders Housing Market Index, ahead of Tuesday’s Housing Starts numbers.

Other than that the Greenback is expected to remain under pressure, as more and more nations lose faith in the currency that once represented the symbol of economical robustness, and is now becoming less relevant on a global scale.

Is The Greenback Pushing Back?

As we have noticed during the last several days, the US dollar has continued its recovery progress against most of the 16 most activated currencies. The US dollar extended its gains against the EUR and the GBP after the poor British retail sales figures. The Sterling came under pressure after a 0.1% slip in UK retail sales in October and it amplified speculation that the UK central Bank will lower interest rates in order to stimulate consumer spending. The dollar rose against the EUR, as the 13-nation currency fell to $1.4612 in the late afternoon from $1.4676, and the pound dropped to $2.0434 from $2.0563. The EUR continued to weaken as investors continued to cool down by following the yen-funded carry trades in the course of growing risk aversion stemming from the lingering credit problem. This risk aversion sentiment helps the greenback to get stronger as many investors invest back in the US currency.

In addition, The U.S. Labor Department reported yesterday that Consumer Price Index rose by 0.3 percent in October, the second month in a row with inflation at that level. The main reason was due to an additional increase in energy prices and an increase in food costs. On the other hand, also yesterday, The U.S. Labor Department announced that the amount of unwaged workers who filed claims for unemployment benefits increased by 20,000 last week to 339,000, the highest level in four weeks. The Federal Reserve on Thursday injected its biggest daily infusion into the U.S. banking system since September 11, 2001 attacks. The Fed injected $47.25 billion in temporary reserves and by doing so the system increased by a net $6.75 billion, as the central bank added more liquidity to stem a rise in the federal funds rate in order to try to increase step by step the power of the US dollar. So we may see the dollar rally temporarily but the longer term outlook still looks bleak for the greenback.

Pessimistic Indicators from U.S.

U.S. dollar looks unsure whether to fall or to rise on the Forex market after some important macroeconomic indicators were released today. One of the most important data came out from the University of Michigan and Reuters - Michigan Sentiments Index, which represents consumer confidence. Consumer confidence is important, because it will determine future consumer spendings that in their turn fuel the U.S. economy growth.

Michigan Sentiments Index in November was 76.1; it fell by 4.8 points compared to its October value of 80.9. But according to over-pessimistic expectations (that were at 75.0), Michigan index did quite well this month. Of course, objectively it didn't.

Initial jobless claims for the previous week were released today by the U.S. Department of Labor. They fell right into the market forecast value of 330k, lower than last week's 341k (revised from 339k).

Leading market indicators are considered to be weak in their influence on markets behavior, but nevertheless their value for the October reflects current U.S. economical situation - decrease by 0.5%, below 0.3% expected drop and, of course, worse than 0.3% growth in September.

And with the U.S. commercial crude oil inventories another falling week, oil can be expected to see new record highs in the next days. Crude oil inventories decreased by 1.1 million barrels last week, following the 2.8 growth on previous week. High oil prices may hit dollar on Forex, pushing to the new bottoms.