Dollar Fall Stops With New FED Support
Posted on 09. Oct, 2009 by Founder in Blog
The FED finally came out of his shell today and said they are ready to tighten monetary policy once the economy improves. Once the economy improves? Hasn’t Ben been telling us how great everything is for the past 3 months? Regardless, the Dollar Index, which tracks the currency against six U.S. trading partners, recovered from a 14-month low after the yen dropped against all but three of the 16 most-traded currencies after Japan’s machinery orders gained less than forecast.
The US Dollar ignored gains on Asian stock exchanges, rebounding against the spectrum of major currencies after Fed chairman Ben Bernanke said the Fed was ready to “tighten” monetary policy once the economy improves.
Key Overnight Developments
• Bernanke Says Fed is Ready to “Tighten” Policy as Economy Improves
• US Dollar Ignores Stock Gains, Rebounds Against Major Currencies
Critical Levels
The Euro sold off in overnight trading, slipping as much as 0.6% against the US Dollar. The British Pound followed the single currency lower, testing as low as 1.60 against the greenback. Curiously, the Dollar rebounded against the spectrum of major currencies despite gains on Asian stock exchanges that would have been expected to weigh on the safety-correlated US unit.
Alcoa Earnings Beat Estimates, Commodities Rise
Posted on 08. Oct, 2009 by Founder in Blog
Stock futures rose on Thursday as the latest earnings season got off to a positive start after Alcoa posted a surprise profit and as surging commodity prices underpinned a global equity advance.
Before the bell, shares of Alcoa Inc were up 7 percent at $15.20, a day after the Dow component posted its first profit in a year on cost savings and higher aluminum prices.
S&P 500 futures rose 9.40 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 75 points, and Nasdaq 100 futures added 12.25 points.
Gold prices rallied to a record for a third successive session on persistent weakness in the U.S. dollar. Spot gold touched a record of $1,058.20 an ounce and lifted silver and palladium. U.S. front-month crude jumped nearly 1 percent. On the economic front, the government is due to report weekly jobless claims at 8:30 a.m. EDT.
US Dollar Falls For The Week
Posted on 12. Sep, 2009 by Founder in Blog
The US dollar ended Friday on mixed note, as a more than 1 percent decline against the Japanese yen generally put the currency under pressure versus the rest of the majors. US economic news was generally better-than-expected, as the University of Michigan’s preliminary reading of consumer confidence jumped to a 3-month high of 70.2 in September from 65.7 in August.
A breakdown shows improvements in sentiment on both current economic conditions and the economic outlook, which differs greatly from the previous month, when the current conditions component dove to a 5-month low. That said, the final reading of the survey isn’t due out until September 25, and it is highly prone to revisions. Meanwhile, wholesale sales rose for the third straight month in July at a rate of 0.5 percent, and combined with a 1.4 percent drop in inventories, the inventory/sales ratio slipped to 1.23, the lowest since October 2008, from 1.25.
Overall, this indicates that rising domestic demand is helping to eliminate the excess supplies piled up in wholesaler stock rooms. On the inflation front, the US import price index rose 2 percent in August, which brought the annual rate up to -15.0 percent from a record low of -19.2 percent, and suggests that next week’s release of the US consumer price index (CPI) could show similar buoyancy.
In addition to CPI, the US dollar will face big event risk on Tuesday as the Commerce Department is forecasted to report that US retail sales jumped 1.8 percent in August, which would mark the biggest monthly rise since January 2006, led by increased auto and gas station sales. Indeed, as the deadline for the “cash for clunkers” program neared on August 24, eligible buyers likely rushed to take advantage of the deal.
Furthermore, this index is not adjusted for inflation, so the steady rise in average gasoline prices during the month should contribute to overall gains. That said, excluding items like autos and gas, advance retail sales are projected to edge only 0.1 percent higher, following 5 consecutive months of contraction, but there may be even greater upside potential due to “back to school” shopping.
Measures of consumption could start to deteriorate once again in September, though, as the impact of the “cash for clunkers” program fades and as unemployment continues its steady ascent. Nevertheless, if the August reading of US advance retail sales reflects strong results, the US dollar could rally in response.
Dollar Rallies & Oil Falls
Posted on 29. Jul, 2009 by Founder in Blog
Exhaustion is finally starting to weigh on the market’s July rally. Investors are absorbing the June durable goods order, a surprising oil inventory report, big news on a Microsoft/Yahoo! alliance, and a steady stream of earnings reports. Most sector indices are trading lower with banks, defense, biotech and healthcare the only bright spots still in positive territory today.
Here is a chart of the EUR/USD which is showing the dollar making very strong gains after hitting major FOREX resistance a day earlier.
Back in the states investors were mulling over the June durable goods order. This measure of big-ticket items caused a stir when the headline number dropped 2.5%, the biggest decline since January’s drop when the report fell 7.8%. Economists were only expecting a 0.6% decline. The sudden drop sparked fears that the economic recovery was already in jeopardy. Yet drilling down deeper into the report the pull back was fueled by huge declines in aircraft demand. Aircraft and autos make up the transportation sector, which tends to be more volatile. Excluding the transports the durable goods order actually came in at a positive +1.1% in June, which was better than economists’ +0.0% forecast for durable goods without the transports. The market will get another look at the economy with the Federal Reserve’s Beige Book report due out later this afternoon.
Another surprise today was the weekly oil inventory numbers. Economists were forecasting a drop of 1.5 million barrels. Imagine the shock when the Energy Department reported a surge of 5.15 million barrels instead. Demand continues to be soft and with inventories on the rise it does not paint a very bullish picture for oil. Crude oil futures are plunging more than 5% to under $63.85 a barrel. Further exacerbating the move is a sharp rally in the U.S. dollar. The dollar strength is pushing gold, copper and the rest of the commodity sector lower.
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