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Daily Analysis

Dollar on a dipping slope again and fears of high inflation

Fri, May 9 2008, 13:12 GMT
by Benny Menashe

Finotec Group Inc.

The U.S. trade deficit will have probably narrowed in March as a weaker dollar boosted exports of machinery and food, economists said ahead of a government report today which comes out at 12:30pm GMT. The trade balance Measures the difference in value between imported and exported goods and services. A positive Trade Balance indicates that more goods and services were exported than imported over a given period. A rising trend has a positive effect on the nation's currency. Faster growth overseas and a dollar that has lost a quarter of its value in six years are boosting demand for American-made products, while slower U.S. consumer and business spending is limiting imports. An improvement in the trade gap may also come from slowing imports as consumers, facing falling home values and rising fuel bills, restrain spending. U.S. companies are also investing less in foreign-made equipment as concern grows that consumer demand will continue to weaken.

A smaller gap may help the U.S. avert a deeper economic downturn as the housing market continues to slump. ``Exports are one of the points of strength,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. ``If we avoid a quarter of negative growth, it will largely be due to trade.'' Cisco Systems Inc., the world's biggest maker of networking equipment, is among the companies benefiting from gains abroad. The San Jose, California-based company posted sales growth of 10 percent in the third quarter, even as U.S. sales grew only 5 percent.

German whole sale price Index came in at 0.6% from an expected 0.5% which boosted the Euro somewhat this morning, EUR/USD currently trading at $1.5474 as of 8:11am GMT. The pound erased its gains against the dollar and extended declines versus the euro. The U.K. currency weakened to $1.9516 as of 6:30 am GMT, from $1.9541 yesterday. It slid to 79.12 pence per euro, from 78.78 pence.

Today's Economic Events

Published on  Fri, May 9 2008, 13:16 GMT

Archive

• Dollar falls against the major currencies
  Published On Fri, May 16 2008, 12:47 GMT
• Bleak assessment for the British economy
  Published On Thu, May 15 2008, 13:11 GMT
• Dollar rises for a second say as signals indicate the worst is over
  Published On Wed, May 14 2008, 12:34 GMT
• Dollar is steady, waiting for Retail Sales data
  Published On Tue, May 13 2008, 12:19 GMT
• Dollar climbs as US economy shows signs of recovery
  Published On Mon, May 12 2008, 12:39 GMT

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