Reply #6: daily dollar watch [View All]

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Dollar Discounts Claims Data Due to Nominal Impact on Fed Decision

http://www.dailyfx.com/index.php?option=com_content&task=view&id=3040&Itemid=39

The US dollar continued to lose ground against the euro despite some encouraging labor market data. Jobless claims fell to 315,000 from 319,000 last week and has remained below the 320,000 mark for the past six weeks - which is consistent with triple digit non-farm payroll gains next Friday. The help wanted index also edged higher from 38 to 39. Unfortunately this failed to prevent the dollar from sliding for the fourth straight day. The market’s focus was once again directed on oil, with the storm brewing down in the Gulf causing prices to hit yet another all-time high. The more immediate uncertainty in the months ahead lie in how much more oil will rise and its impact on consumer spending. CNN is already talking about how consumers are shifting purchases to cheaper brands in attempts to find ways to alleviate the higher costs at the pump. For the time being, the market already knows that so far, the economy is still holding up thanks to the boom in the housing market. Therefore, it has probably discounted a strong labor market report, especially since the result will not sway the Federal Reserve’s decision to raise interest rates once again on September 9th. Meanwhile Princeton economist Paul Krugman joined the ranks of economists who are calling for a housing market collapse. Krugman was quoted as saying, "I'll give you a forecast which might very well be wrong, but I think it will burst in the spring of next year." He also added that he would be surprised if the market did not burst over the next 3 years. As we have always been saying, first goes the housing market and then goes consumer spending. Oil and housing are the big themes affecting the dollar right now and we expect them to remain the predominant themes throughout the second half of the year.

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Forex: Dollar Markets Hit One Week Lows

http://www.dailyfx.com/index.php?option=com_content&task=view&id=3030&Itemid=62

The dollar weakened to one-week lows against both the euro and pound during the overnight hours prior to bearish Euro data that brought the pairs back down a bit. This was stalled after an uneventful release of jobless claims data. By midday the dollar was trading at $1.8026 and $1.2302 against the pound and euro, respectively.

The morning’s initial jobless claims report showed a decline to 315,000 claimants from an upwardly revised 319,000 seen a week ago. This figure was right on target with the median economist estimate and is supportive of a strong nonfarm payrolls figure going into next Friday’s release. The Conference Board’s Help-Wanted index also indicated that more labor market improvements are on the way. The national index rose for the second month in a row to 39 from 38 showing a slightly friendlier job market. However, there is a sense of wariness surrounding these reports. With energy costs so high, it seems inevitable that firms must shed employees at some point and the market seems to be on edge waiting for these job cuts to show up.

Despite oil hitting $68 a barrel today, equities rallied marginally on acquisitions news. By midday, the Dow Jones Industrial Average was up 11.86, or 0.11%, to 10,446.73. The NASDAQ added 5.56, or 0.26% to 2,134.47 as the S&P 500 was slightly higher by 1.96 points, or 0.16%, to 1,211.55.

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