Source: Investica
Dollar confidence will remain weak in the short term and the inability to regain former support levels is a particularly worrying sign, but some limited correction is realistic.
The dollar remained under pressure on Thursday and weakened to fresh record lows just beyond 1.4180 against the Euro with the trade-weighted index at new 15-year lows.
The US new home sales data was weaker than expected with a 8.3% monthly drop to an annual rate of 795,000. There was a further rise in inventories over the month while prices also dipped. The sales decline will reinforce concerns over the housing sector, although the data was actually greeted with some relief as, ahead of the release, there were rumours of a 10% decline.
Second-quarter GDP was revised down to an annual rate of 3.8% from 4.0% previously. The jobless claims was stronger than expected with a headline drop to 298,000 in the latest week which was the lowest figure since May. Although the data will remain volatile, the recent figures have not suggested heavy layoffs and this will also ensure strong interest in next week’s monthly payroll release. Strong data would curb expectations of further aggressive Federal Reserve interest rate cuts with markets currently putting the chances of an October cut at around 90%.
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