• Home ::
• Fundamental ::
• Market View ::
• European and US summary

• Send
• Print
• Add To
• Rss

European and US summary

aa5e6c85-f5b7-4ac6-a700-eef75b0e9c12

0

0

Confidence Hits USD, Awaits FOMC

Tue, Jun 24 2008, 22:16 GMT
by Korman Tam

Forexnews.com

6/24/2008 3:35 PM: EUR/$..1.5568 $/JPY..107.79 GBP/$..1.9692 $/CHF..1.0407 AUD/$..0.9549 $/CAD..1.0113

Confidence Hits USD, Awaits FOMC

Economic data dragged the dollar lower across the board, sending it to 1.5621 against the euro and 1.9722 versus the sterling. The disappointing reports tempered market expectations for the Fed to tighten policy, with Fed funds futures pricing a 70% probability for an August rate hike versus 74% prior to the release of US consumer confidence.

The Conference Board's index of consumer confidence plunged to its lowest level in 16-years, far beneath estimates to 50.4 in June versus an upwardly revised 58.1 in the previous week. Meanwhile, the S&P Case-Shiller house price index posted record declines for April, on an annualized basis falling 15.3% and lower by 1.4% from the previous month.

The FOMC monetary policy meeting tomorrow is not expected to yield any change in interest rates. However, the key focus for traders will the accompanying policy statement. Recall in April's statement, the Fed tempered expectations for further rate cuts, implicitly calling for a pause in policy. The FOMC said, "The substantial easing in monetary policy to date should help to promote moderate growth over time and to mitigate risks to economic activity". Given continued upward pressure on inflation and hawkish comments from several Fed Board members, it is likely the FOMC will provide subtle hints that while the next move will indeed be a hike, in light of lingering weakness in the US economy, it will be in no hurry to tighten policy and permit the aggressive rate cuts to trickle through the economy before shifting policy stances. Accordingly, we view such a statement to negatively impact the dollar.

US economic reports slated for release in the Wednesday session include durable goods orders, new home sales and building permits. The typically volatile durable goods orders are seen reversing the 0.6% decline in April, improving by 0.1%. The excluding transportation reading is seen falling by 0.8% compared with a 2.4% increase in the previous month. Meanwhile, new home sales are expected to remain soft, falling to 510k units in May versus 526k units a month.

Published on  Tue, Jun 24 2008, 22:18 GMT