Last week’s outstanding award should go to the US dollar, which not only had to brace itself for heavy-weight economic releases such as GDP, FOMC rate decision and US non-farm payrolls, the currency had triumphed versus other major currencies like the Euro, Swiss franc, British pound and the Japanese yen. Permanently pessimistic observers were kind of “unhappy” to see that the US economy did manage to expand in the first quarter of this year, growing by a paltry 0.6%, thinking that if it weren’t for the inclusion of inventories, the economy would have been in contraction, not growing at all. For the rest of us who think that inventories and government spending is good for the economy anyway, the US economy looks pretty resilient still, considering it has big enemies such as surging prices of food and fuel, housing market recession and the credit crunch. Here’s some more data from last week which supports that view: Friday’s labor data showed that the unemployment rate for April fell to 5% from 5.1% in March, and 20,000 jobs were lost, a much smaller loss than the 80,000 expected. And according to the ISM manufacturing report that was released on Thursday, although the headline index posted a mild contraction of 48.6 in April, the same as in March, its export index rose to 57.5 in April, an indication of expansion.

We won’t be stepping out to proclaim that the worst is over, though some big players may do so out of their own vested interest. Maybe the worst is yet to come. Or perhaps we are staring at soft landing in progress, and the recession turns out tame.

Lawmakers Seek Hearing On Dollar’s Decline

US Republican lawmakers are seeking congressional hearings on the dollar’s fall, wanting to know how the Fed rate cuts have caused the decline and pushed commodity prices higher. In a letter dated May 1 to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, the lawmakers said, “We cannot stand idly by while the dollar’s value continues to plummet, pushing up food and energy prices and lowering the American people’s standard of living.”

Forex Trading

USD/CHF rose to a 2-month high around 1.0610, and if it manages to break above, it may aim towards 1.0650, 1.0700-30. Its base of support is around 1.0440-50. EUR/USD’s immediate support lies around 1.5340, and if this gives way, it may target 1.5280-1.5300, then 1.5230. Otherwise USD may dip if EUR/USD stays above that base. GBP/USD has had a volatile week, but is generally heading downward, capped by its down trendline. According to UK mortgage lender HBOS, UK house prices had their first drop on an annual basis in more than 12 years in April.

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