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US Data Poses No Threat to the Dollar

By FX360 May 10, 2012, 05:30:31 AM EDT

After eight straight days of weakness, the EUR/USD is finally getting some relief. Risk appetite stabilized overnight, helping to lift currencies such as the euro up against the dollar. No news was good news this morning for Greece with the baton now set to be passed to Pasok leader Venizelos who will take a shot at forming a coalition government. Like Samaras and Tsipras he is expected to fail, leaving elections in June as their only option. Until the June elections are held, it may be smarter to sell than buy rallies in the euro.

Meanwhile we finally have some U.S. data on the calendar. This morning's reports were mildly negative for the U.S. dollar with trade balance widening significantly from -$45.4B to -$51.8B in March. Exports rose 2.9 percent while imports increased 5.2 percent. Trade activity in the first quarter is now expected drag GDP growth lower because of the sharp deterioration from Q4. Thankfully manufacturing activity rebounded in April which suggests that the next trade balance report could show a smaller deficit. More importantly, jobless claims dropped from 368k to 367k. Although the prior report was revised slightly higher, the absolute level of claims is consistent with an improvement in the labor market. In other words, the jobless claims figures were neither good nor bad but low enough to prevent USD bulls from going into panic mode. If jobless claims ticked back above 380k, we would expect payroll growth to weaken further in May but there is nothing to worry about in today's numbers. The 4 week moving average also dropped to 379k from 384k while continuing claims dropped to its lowest level since summer of 2008. Finally import prices fell 0.5 percent last month. With inflationary pressures softening, Federal Reserve officials will have no problems with maintaining their dovish tone.

Fed Chairman Ben Bernanke will be speaking at 9:30am ET / 13:30 GMT. The topic is bank capital but these days, you never know when a central bank official will use scheduled speeches as an opportunity to touch on monetary policy.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, Forex and Currencies

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