Dollar Rally Ends With More Disappointing News Out of the US
Thu, Mar 27 2008, 19:50 GMT
by Andrei Pehar
Let's start with the good news. Unemployment claims in
the US
dropped from 375K down to 366K. GDP growth remained constant at 0.6%, and the Deflator (a GDP-based inflationary measure) shrank from 2.7% to
2.4%
However looking back at the week, we also saw core Durable Goods orders drop
from -1.0% to-2.6%. New Home Sales also fell from 601K to 590K and the
national Home Price Index dropped by 10.7% for the year. Existing home
sales rose slightly from 4.89M up to 5.03M, likely influenced by the lower
prices and speculative rather than residential buying.
But the big news story this week was US Consumer Confidence, which came in at
64.5 - signaling the biggest decline since the 1973 oil embargo. Oil over
$100 per barrel, OPEC threatening to reduce production, and ongoing conflicts
in the Middle East are not helping the situation.
Fears that the US
will slip into recession are growing, and the Dollar - after a brief rally before
Easter - has resumed its decline. The European Central Bank and the Bank
of Japan have held meetings regarding ways to "protect" the Euro from
going beyond 1.60 and the Yen from dropping below 95.00, however it is yet
unclear as to what form this intervention may take.
Economic reports coming out of both Europe and the UK suggest that - so far - those
economies are remaining resilient. Asian markets, however, seem to be
reflecting the Dow's movements on concerns that the economies are still very much
dependent upon one another.
