Greenback hardly a safe haven

Currencies Direct September 23rd 2010 - 2 minute read

The FOMC decision and statement from Tuesday evening was still the catalyst of movements in all of the markets yesterday, as Asian and European investors had the opportunity to react to the news. Further US Data also showed that home prices dropped 3.3 percent in July from a year earlier, the eighth consecutive decline, as foreclosed properties flooded the market. Prices fell 0.5 percent from June vs. a market expectation for only a 0.2% decline, the Federal Housing Finance Agency in Washington said yesterday. The time it would take to clear the market of homes for sale also hit a 10 year high of 12.5 months.

Data from the European Unions statistic’s office yesterday showed that industrial orders declined more than economists forecast in July, led by a drop in capital goods such as factory machinery. Orders in the 16-nation euro area decreased 2.4 percent from June, when they rose 2.4 percent. Economists had expected orders to drop 1.4 percent. Eurozone consumer confidence figures for September also remained unchanged from the August reading at -11.

The minutes of the most recent Bank of England meeting, released yesterday, signalled that it’s moving closer to more asset purchases, joining the Federal Reserve in contemplating further stimulus to revive a flagging economic recovery. That may put both the expansion of the central bank’s 200 billion-pound government-bond holdings and buying other securities on U.K. officials’ agenda. Policy maker Adam Posen last week argued that a “plan B” approach for the Bank of England should be “heavy-duty credit easing.” The Confederation of British Industry also cut its gross domestic product forecast for next year.

On the US data front today, we have US initial unemployment claims for the week ending September 18 and August’s existing home sales. In Europe, we have the first reading of the PMI’s. A moderate decline of the composite index from 56.2 to 55.7 is expected. For this indicator, the question will be whether the actual decline, if any, will be enough to shift the market focus again to the risks of Europe in such a way that it will outweigh the overall story of dollar weakness.

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