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Daily Forex Strategy Briefing

Oversold, Greenback Rebounds

Thu, Nov 30 2006, 01:28 GMT
by Hans Nilsson

CMS Forex  |  View company's profile


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• The dollar rose against other major currencies after a government report showed US Q3 GDP was revised higher. St. Louis Federal Reserve Bank President William Poole stated it is too early to give the all-clear on inflation. The greenback rebounded from a 20-month low as traders took profits on the dollar short position. The dollar is extremely oversold, possibly benefiting from profit-taking a bit longer.

Financial and Economic News and Comments

US & Canada
• October’s US new homes sales fell 3.2% m/m to 1.004m units, while the median sales price rose to the highest price in 8 months, the US Commerce Department reported. Over the past year, sales have fallen 25.4%.

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• US Q3 GDP was revised 0.6% higher to 2.2% as the price index held at 1.8% and the core PCE price index was revised slightly lower to 2.2%. Upward revisions to business investment (10%), inventories, government spending and lower imports more than offset downward revisions in personal spending and exports. Inventories rose about $8b, a boost to current GDP but a depressant to future output. Net exports were lower by $10b mostly to weaker imports, suggesting domestic demand has faded. The two major GDP revisions boost Q3 GDP; however, neither sets the stage for a stronger Q4.

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• US Q3 core personal consumption expenditure (PCE) excluding food and energy rose a lower-than-expected 2.4% q/q, according to the US Commerce Department.


• Even with the slowing US economy, Fed Chairman Ben S. Bernanke stated clearly yesterday that policymakers want to see inflation continue to recede implying the Fed probably won’t be cutting interest rates soon.


Europe
• UK mortgage lending and approvals rose to the highest level in 3 years by ₤9.8b in October, the Bank of England said. The number of approvals for house purchases in October also rose to 128K from 127K in September.


• New orders for machinery and plants in Germany during October rose 19% y/y, Germany's VDMA industry association said. The index for orders from August to October rose 17% y/y.


Asia-Pacific
• Australia’s trade deficit for goods and services on a seasonally adjusted basis stood at AUD1.263b in October, widening from AUD0.728b deficit in September, the Australian Bureau of Statistics (ABS) said.


• October’s Japanese industrial output unexpectedly increased 1.6% m/m, 7.4% y/y, bringing the industrial output index to a record high of 107.8, preliminary data from the Ministry of Economy, Trade and Industry (METI) showed.


• The Bank of Japan will do its utmost to avoid surprising financial markets and aim to signal any interest rate rise well in advance, BOJ Governor Toshihiko Fukui said.

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Published on  Thu, Nov 30 2006, 01:37 GMT


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