Currency Thoughts in Late NY Afternoon

The major currencies traded choppily in the NY session today, largely within the ranges establishing in Europe. Of note today, the US economic reports warn of the risk of a downward revision to Q2 GDP and probably softer retail sales than had been expected. It helps serve to keep the speculation a renewed QE by the Fed alive.

The BEA had assumed that nondurable inventories rose, but today's factory goods orders indicate they fell. The revision to GDP could bring it closer to 2%.

Auto sales look a bit softer than expected, especially by the "Big Three" despite some new incentives. This may see economists cut the July retail sales forecasts.

The pullback in the major foreign currencies has been shallow once again and this suggests the up move is not yet exhausted. That said, the European debt market outperformed the US today and this is leading to some shift in rate differentials toward the US. We will continue to monitor this and expect that a dollar recovery will require some shift in the incentive structure of short-term interest rate differentials.
Currency Thoughts in Late NY Afternoon Currency Thoughts in Late NY Afternoon Reviewed by Marc Chandler on August 03, 2010 Rating: 5
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