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Video for February 26th, 2008 (2 min 39 sec): Dollar Declines Broadly vs Rivals; Hits Record Low vs Euro GER IFO Business Climate Index Improves for 2nd Month In Germany, the IFO business climate index reported an increase for the second month in a row, as firms saw their current condition improve from January. This gives the European Central Bank room to tackle inflation issues and lessens the chance it will lower rates. SWZ Consumption Indicator Strong In Switzerland, the UBS Consumption indicator remained at a high level. Retail activity and new car registrations pushed the indicator up from its downwardly revised reading in December. The Swiss Franc strengthened in the session following the news. US Proudcer Inflation Jumps 1% Inflation to US producers climbed 1% in January, double the expectations of economists. The rise was driven by higher fuel, food, and drug costs. Core PPI, which excluded food and energy, was up 0.4%, which was double December's rate as well as exceeding forecasts. The Fed has little wiggle room to cut rates because it will be facing the inflation issue. US Housing Prices Keep Falling Home prices in the 20 metropolitan cities continued to decline, with December's year to year change amounting to a 9.1% plunge. A second release, from the Office of Federal Housing Enterprise Oversight, showed prices down 1.3% for the 4th quarter. US Consumer Confidence Hits 5 Year Low Consumer Confidence, as measured by the Conference Board, declined to 75 for February - a five-year low. A weakening labor market and poorer business conditions have dampened outlooks. US Richmond Fed Index Shows Improvement In a final release, a report on manufacturing by the Richmond Fed showed improvement in February, though overall the index remained negative. The data contrasts with the Philly Fed Index which saw activity continue to deteriorate. EUR/USD - Euro Break Above Resistance
After declining initially overnight, the Euro-Dollar pair was boosted by the German business climate data. The pair rallied more than 130 pips setting a high near 1.4950. During the US session, inflation data and further housing slowdown is working to weaken the greenback. USD/CHF - Franc Breaks Below Support
Following the Swiss UBS Consumption indicator's release the Dollar-Swiss Franc pair fell in favor of the Franc. The pair broke through support at 1.0850 and was down more than 100 pips from its open. GBP/USD - Pound Surges 200 Pips
The Pound-Dollar pair rallied 200 pips this session, breaking through resistance at 1.97 and then 1.9750. Today's breakout follows two sessions of sideways action. The pair was last at this level on February 1st. AUD/USD - Aussie Hits 3 Month High
The Aussie-US Dollar pair reached a 3 month high today. The pair has been in a protracted uptrend since mid January as the interest rate differential has widened. The Reserve Bank of Australia is prepared to raise rates next week. By 3 PM NY time the pair was trading near 0.9320, and was up around 85 pips so far in the week. Upcoming Releases Overnight, Germany will unveil a report on consumer confidence and the UK will post its revised version of GDP for the 4th Quarter. Tomorrow the US will reveal orders for durable goods along with data on new home sales. |
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