Currency news - Hope versus fear for the US dollar

Hope versus fear for the US dollar - 07-01-08

Following significantly weaker than expected data on Friday, the US currency dipped sharply to lows around 1.4820.

US employment growth for December was held to 18,000 after an upwardly-revised 115,000 in November while unemployment rose sharply to 5.0% from 4.7% as the number of people looking for jobs increased. There were monthly employment falls in the manufacturing, construction and retail sectors with the total payroll increase the lowest for four years.

The ISM index for the services sector was little changed at 53.9 for December with orders and employment indices rising over the month. The ISM data will provide some relief, but the employment data will continue to increase unease over economic trends and will maintain pressure for an aggressive series of interest rate cuts by the Federal Reserve.

The latest ECRI inflation index also dipped to a three-year low for December. Futures markets put the possibility of a 0.50% cut at the end of January at over 50% following the payroll data. The dollar will, therefore, remain vulnerable on yield grounds, although a substantial amount of easing has now been priced in.

The dollar strengthened back to near 1.4660 in Europe on Monday before consolidation near 1.4685.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

Full list of daily currency analysis

This analysis report is intended for distribution to ACM Advanced Currency Markets SA private, corporate customers and members. Information contained in this report is based on data obtained from sources considered to be reliable, however, no guarantees be made by ACM Advanced Currency Markets SA as to the accuracy, timeliness and completeness of the data. The opinions and forecasts contained herein are subject to change without notice and ACM Advanced Currency Markets SA accepts no liability for any losses, damages and/or expenses incurred arising from or in any way connected with the utilisation of all or part of this report. This report is meant for information purposes and is not intended to be and should not be construed as an offer or solicitation to buy, sell foreign exchange or indeed any other financial instruments. This report, or any part of it may not be reproduced or distributed without the prior consent of ACM Advanced Currency Markets SA.