Finotec News Archive - May 06 2008
Dollar slumps for the second day
The Dollar fell for a second day against the Euro, as doubts resurfaced about the health of the US economyJoana Fonseca
06 May 2008
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| EUR/USD | USD/JPY | GBP/USD | EUR/USD | |
|---|---|---|---|---|
Resistance | 1.5680 1.5600 1.5520 | 106.00 105.60 105.00 | 1.9900 1.9860 1.9785 | 1.0730 1.0640 1.0610 |
Support | 1.5445 1.5370 1.5300 | 104.70 104.05 103.50 | 1.9700 1.9660 1.9600 | 1.0510 1.0450 1.0400 |
The Dollar fell for a second day against the Euro, as doubts resurfaced about the health of the US economy. Despite the surprising result in the ISM survey of the US services that raised to 52.0 in April from 49.6 in March, putting it above 50, which should reflect an economical expansion, the Dollar traded at 1.5534 against the Euro at 4:00am GMT; negative equity sentiment dominated the market on the holiday trade. Federal Reserve Chairman Ben S. Bernanke said that mortgage conditions will strengthen, pushing house prices down, hurting the broader economy and threatening the financial system. The dollar may fall to $1.59 per euro in three months, Forrester forecast.
European Central Bank President Trichet warned once again for the risk of inflation, leading to speculation that interest rates will be kept at 4 percent, when ECB meets on Thursday. Also, the unexpected weakening in the euro zone investor morale in May helped to boost the Euro, based on investors’ confidence that ECB will maintain interest rates at a six-year high to control inflation. U.S. data “is still showing the economy is slowing, while the ECB will still sound hawkish this week”, said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York. ``The euro is still supported.''
Record oil prices boosted commodity currencies, such the Australia and Canadian dollars; the Australian Dollar traded at 0.9454 against the Dollar and the Canadian traded at 1.01 against the same currency at 8:00am GMT. As investors focus their attention on higher-yield currencies, the Australian Dollar strengths, as the Reserve bank of Australia kept its 12 year-high benchmark of 7.25 percent. The Japanese yen may rise to 100 per dollar in the next three months because investors will cut holdings of higher- yielding assets as housing markets and economic growth slow further, according to UBS AG. The Yen traded at 104.94 against the Dollar and at 162.63 against the Euro at 8:00am GMT.
After the British holiday yesterday, the Consumer Confidence Index for the UK will be revealed today; it’s forecasted to drop from 77 to 74, which has a negative impact in the Pound. A higher consumer confidence leads to higher consumer spending, boosting the economy. The British currency traded at 1.9700 against the Dollar and at 0.7868 against the Euro at 8:00am GMT.
Finotec Analysis Team
06 May 2008
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