Dollar Surges On Better-Than-Expected Durable Goods Even Though Oil Inventories Are Down

So far it has been quite a good week for the US dollar when it comes to US economic figures. Wednesday’s release of July US durable goods orders came out better than market consensus, jumping to 1.3%, following an unrevised 1.3% increase in June, and versus an expected increase of just 0.1%. A 28% increase in civilian aircraft orders contributed to the jump in transportation orders which saw the largest increase (3.1%) since February. Although the US dollar went through the Asian and European trading session on a weaker footing, it regained some bullish vigor post durable goods, most notably against the British pound and the Japanese yen.

Oil Shows Muted Response

Crude oil is now rising for the third straight day on concerns about the tropical storm Gustav creating havoc in the Gulf of Mexico and on the smaller-than-expected oil inventory. The US dollar’s gains at the moment are being restrained by the elevated oil price which lingers above $118 at the time of writing.

Today’s report from the US Department of Energy showed that crude inventories are down by 177,000 barrels and distillates are up by 57,000 barrels, both less than the respective forecast for a 1 million-barrel rise in crude stocks and a 500,000 barrel increase in distillates. Also hogging headlines is Gustav which is forecast to pick up hurricane-like speed as it approaches the oil platforms and rigs off Louisiana and Texas, where US refinery operations are concentrated.

Fed’s Lockhart Welcomes Firm Dollar

Today we got another signal from the Fed that interest rates are likely to stay unchanged at 2% for the rest of the year. Atlanta Fed President Dennis Lockhart said today that he is comfortable with current rate stance as it is “consistent with an easing in overall inflation given the dynamics of the economy.”

He said that “both headline and core inflation will diminish over the rest of 2008 and into next year as the temporary effects of energy and food price increases abate.” He is pleased that lower energy prices and a stabilizing US dollar are helping to stem rising inflation - for the time being. Another point goes to US bulls.

In forex trading, EUR/USD’s nearest resistance now lies around 1.4780-1.4800 while USD/CHF has to overcome 1.1010 and 1.1040 before it can retest Tuesday’s high of 1.1090. GBP/USD fell to another 2-year low today, and actions around 1.8280 must be closely watched. If stops below this level are tripped, GBP bears may drag it down towards 1.8200.

Economic Calendar For Thursday:

German CPI

Eurozone consumer confidence 0900 GMT

US GDP (preliminary), core PCE, initial jobless claims 1230 GMT

UK GfK consumer confidence 2301 GMT

Japan national CPI 2330 GMT

Posted in Categories: Forex.

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