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02/24/2008 - USD weakens, but still within a range

Posted by FOREX.com's Weekly Strategy in February 22nd 2008  
* USD weakens, but still within a range
* Commodities outpace all other markets
* JPY repatriation has begun
* More US housing and other key data next week

The dollar gave up further ground against other major currencies as fresh signs of economic slowing materialized, but the overall ranges continue to hold. US data mostly came in on the weak side, while data elsewhere generally surprised to the upside. US Jan. core CPI was a touch higher at 0.3% MoM and 2.5%YoY, highlighting the ongoing threats from inflation. Jan. housing starts were slightly improved, but building permits, the leader in the cycle, fell further to 1048K from 1080K, suggesting there is no end to the downturn in new home building and the larger housing market. Jan. leading indicators declined -0.1%, while Philadelphia-area manufacturing sentiment fell even further to -24.0 from -20.9; forecasts had been for an improvement to -10.0. Minutes from the Jan. 29-30 FOMC meeting revealed a Fed highly concerned about the extent of the US downturn and clearly focused on stabilizing the US economy through lower rates. Markets remain convinced the Fed will cut rates a further 50 bps at its next meeting on March 18, with the weaker Philadelphia Fed Index inspiring some to expect 75 bps of easing.  Full text »

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Filed under: Weekly Strategy