We knew that there were going to be some hurricane-related distortions in the September data, but this really exceeded our worst fears. This was a turn for the worst. |
We see that elevated oil prices and a continued Asian central bank intervention ensures that foreign demand for U.S. treasuries remains strong during January. |
We won't see the dollar embarking on any new trend until the markets get a better sense of where the Fed is headed. |
We would have to say there is a confluence of events conspiring against the dollar. |
Were this trend in new home sales to continue, the Fed will be less likely to increase interest rates, which would be a dollar negative. |
What we are concerned about is that going forward they may decide to remove petrodollars and redirect them elsewhere. If they do, it is negative for the bond market and ultimately for the U.S. dollar. |
Whereas Asian demand for US bonds is unlikely to end any time soon as a conscious policy decision, the reversal of petrodollars from the US bond market remains the greatest threat to the dollar in 2006. |
While the monthly December data was not itself a negative surprise, the aggregate 2005 total was a rude reminder. |
While the US trade deficit showed an unexpected improvement in February, any lasting market enthusiasm was firmly misplaced. Energy prices continue to rise while China remains resistant to further currency flexibility. |
With the market now anticipating a pause in monetary tightening on behalf of the Fed ... the dollar is having trouble maintaining its value against the majors. Any disappointments in next week's U.S. data could well feed into the emerging bearish dollar sentiment. |
With the market now anticipating a pause in monetary tightening on behalf of the Fed … the dollar is having trouble maintaining its value against the majors. Any disappointments in next week's U.S. data could well feed into the emerging bearish dollar sentiment. |