Dollar loses its gains as US inflation figures mean Fed might not tighten monetary policy. Report Mar 19By james tweed • Mar 19th, 2012 • Category: Currency
Tues 20th March UK – CPI/RPI
US – Housing Starts/Building Permits
Wed 21st March UK – Budget Day, Public Sector Borrowing
US – Existing home sales
Thurs 22nd March UK – Retail Sales
Fri 23rd March US – New Home sales
Thank you for downloading the foreign exchange market report podcast for March 19th from Coracle Online and Crossbar fx.
By the end of last week the US Dollar had lost all of its gains after US inflation figures suggested that the Federal reserve might not need to tighten monetary policy as soon as had been thought. The US Dollar had risen through the week against most currency pairs, but rising Treasury yields backed by signs of a strengthening economy, reduced its appeal as a funding currency. It has become more attractive to own equities and other such investments rather than sit on dollars and this can be seen by the relentless rise of the world’s equity indices. Gold has also seen a price drop, despite last week seeing the biggest ever purchase of bullion by central banks of emerging economies as they diversify their cash reserves away from the USD and the Euro. What do they know the rest of us don’t? That the US recovery is built on a house of cards, and despite the light at the end of the tunnel seemingly getting closer, the debt issue remains?Maxing the credit card to pay today’s bills can’t last forever. But it is election time in the US so why not! Of more concern, if you are Australian say, is that China has a trade deficit for the first time in a decade and cut its growth target to 7.5% for the coming year… So although that is still huge growth compared to the West, any blip will hurt an Australian economy that is reliant on Chinese demand for their raw materials.
Elsewhere the euro zone debt crisis rumbles on. Greece gets its bailout money and the ratings agencies look at the UK and say they have downgraded the outlook on its sovereign rating to negative. Unemployment in the UK continues to grow, but there was an improvement in the Trade Balance as the deficit narrowed a little more than expected. This week sees another raft of data – Inflation, Public Sector Borrowing and retails sales which will lead to increased speculation as to how the Budget is going to maintain the critical patient through the next year.