Negative headlines relating to the US economy may be dominating these days (worse-than-expected existing home sales; Ford’s [[f]] $8.7 billion loss for second quarter etc), but still none of them had been able to dislodge the US dollar. This week marks the second week the dollar closed up against major currencies such as the Euro, Swiss franc, Japanese yen, Aussie and Kiwi, and this has been due to traders repricing their expectations of a near-term rate hike by the Federal Reserve after Philadelphia Fed chief Plosser said that interest rates should be hiked sooner or later. And as mentioned earlier, it doesn’t matter that he only has one vote to give since his sentiments are likely to echo that of his other voting FOMC colleagues.

Sluggish US housing data released this week, especially that of US existing home sales, is likely to weigh on US stocks, but is unlikely to affect the USD much. In any case, the greenback had plenty of support from Friday’s release of economic data. The final University of Michigan consumer sentiment index came out better than what most had expected, jumping to 61.2, from 56.4 in June, compared to the initial reading of 56.6. Plus, US durable goods orders for June also increased by a larger-than-expected 0.8%, with demand rising for automobiles as those orders rose 1.8%, the most since July 2007.

Euro is having trouble maintaining its stickiness near to its record high of 1.6040 reached last Tuesday, and is now down to below 1.5800. According to the latest German IFO data, German corporate sentiment fell to its lowest level since September 2005, declining to 97.5 from a revised 101.2 in June, and that was much weaker than the expected reading of 100.

EUR/USD has a couple of overhead resistance around 1.5750, 1.5780 and 1.5820, and its nearest support can be found around 1.5650.

This coming week will be one that is guaranteed to raise your adrenaline. US non-farm payrolls, ISM manufacturing and 2Q GDP will top the list of major economic releases. Stock investors will be looking forward to more earnings results from companies.

Meanwhile, the US Senate voted 80 to 13 to allow 30 more hours of debate to pave the way for a vote that would send the Housing Bill proposed to the President to be signed into law. The Senate is to vote finally Saturday to approve this bill which would insure up to $300 billion in refinanced mortgages and to establish a new regulator for messed-up mortgage titans Fannie Mae [[fnm]] and Freddie Mac [[fre]].

Posted in Categories: Economy, Eurozone, Forex, Japan, Switzerland, USA, Videos.

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Comment by Mark Gavalda

2008-07-25 16:17:35

Good summary Grace, always love to read what you guys write about. Though I would add the speech of Mr. Paulson to it, I was able to listen live to it and trade the effects… That’s what I call a wave riding :-) Have a nice weekend everyone, greetings from Mark, GavaldaFX.

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