Durable Good Might Push the Greenback Up Today

The greenback fell to a new all time low of 1.4160 against the EUR on the back of continued aggravation in the US economy. It seems that everybody is selling dollars as the outlook for consumer spending becomes gloomy with each passing day. Consumer confidence dropped to a 2 year low in the month of September when sales of existing homes fell to a 5 year low. The deterioration in the labor markets, tight credit conditions and rising energy prices were the major reason for the last market figures.
The drop in confidence and home sales only reinforces the need for the Federal Reserve to continue lowering interest rates. We expect another 0.25% - 0.50% of easing by the end of the fourth Quarter followed by another 50bp before the middle of next year.
The next Non-Farm payrolls report is not expected to be “flattering” either. On top of the layoffs that have already been announced in the financial sector, workers at General Motors held their first nationwide strike in 25 years in addition 73,000 workers have been displaced and 30,000 are expected to be fired.
If this is not resolved soon, it will have a meaningful impact on non-farm payrolls which will naturally dovetail into further weakness for the US economy which only will weaken the USD even more than it has already.
We think that in this case a recession is only a matter of time until we will see it on the statistics figures and the US economy won’t be able to avoid this unpleasant situation.
Meanwhile the only piece of good news was the Richmond manufacturing index which jumped from 7 to 14 in the month of September to the highest level since April 2006. The manufacturing sector is expected to be one of the biggest beneficiaries of the dollar weakness which is why today’s durable goods may not be as bad as analysts are currently predicting thanks to the weak USD which will make the US exports more attractive then ever.