Weekly overview and analysis. -Fed 25 2008 - March 2 2008 -
USD decline last week against most currency was significant, particularly against the euro. Most of the weakness was caused by worse than expected US economic releases, especially New Home sales and GDP, given the dollar no hope for recovery last week.
But this week, a totally different story on the dollar, with important economic releases this week, there is a chance USD to recover against the euro back to the 1.4800 level that if US economic releases is at least within forecast range or didn’t post figure which is far worse than expected.
Before Friday, which the day that most investors and economist is having their focus on, there will be few important economic releases which might give USD a foothold before late week. (Such as: ISM manufacturing, ISM price paid and Factory orders) Monitor for any comments by economists or Fed members on Friday’s economic releases and future rates. Cross currency and Fed members comments would also play a role in USD strength or weakness this week as the dollar at this level (record low) is very sensitive to any outer influence.
JPY record breaking against the dollar was due to the fact that US economic is slowing and rising inflation prompts most investors withdrew their investment on stocks and bonds and invest it in commodities as a hedge against inflation and volatility in the market. Japan’s economy is weakening caused by slower exports due to lower demand of Japanese goods abroad, particularly US.
This week, most economists predicts that the BOJ will hold their benchmark rate amid economy slows as inflation is picking up due to rising cost of foods and fuel restricts BOJ members to consider a rate cut to bolster the economy. This week, cross currency movement and its economic releases is important and might be the only major force behind yen movement this week. Monitor particularly EUR-Euro-zone economic releases and USD-US economic releases also monitor global indexes movement.
EUR record breaking price against the dollar last week were caused by weaker than expected US economic releases and Fed cut speculation as US economy slows. Even as Euro-zone economies slows, none ECB’s policy members signals favoring a rate cut as most of them or all of them, particularly ECB’s Axel Weber said they are more concern about inflation than slowing economy, which reinforce most traders speculation that ECB and Fed benchmark rate will continue to widens as Fed signals they will keep cutting rates to bolster economy and while ECB is struggling wit high inflation.
This week, the dollar might recovers against the euro between early and mid week and euro and dollar near future would be decided by Friday’s US economic releases. Cross currency such as the yen, dollar, Australian dollar and pound would be the main currencies against the euro to closely monitor, other than that, USD would be the main focus of the week, monitor anything related to USD.
Crude oil record breaking price last week was ended as the dollar stabilized against the euro supported by selling pressure as investors exits positions ahead of weekends. With Turkish troops withdrawal from northern Iraq and higher than expected crude oil inventories build, further downside this week is highly favorable. The dollar and OPEC meeting is still the main event that would significantly interrupt fundamental-crude oil price movement.
Venezuela and Iran oil minister favors a production cut while others are likely to support a production cut or hold. Personally, I expect OPEC to keep their production level on hold as a production cut with crude oil price at current level would hurt global economy and future crude oil demand, which this is not most members hoped for even as both Venezuela and Iran President’s would like to see US economies suffer. Crude oil is clearly going downwards this week –fundamentally-, foreseeable near-term interruption is OPEC meeting, USD weakness and storage report.
Loh Chang Yuen,
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