Dollar Unfazed By Mixed Economic Data

The US dollar appears to be unfazed by this morning’s mixed economic data. An improvement in consumer confidence has failed to help the dollar while the weaker news has pretty much been baked into the markets.

Christmas and New Years week is a time when traders are more focused on seeing family than making profits. It is probably truer this year than most because of the sharp volatility in the financial markets and the deep losses endured by most investors.

Third quarter GDP remained unrevised at -0.5 percent even though personal consumption slipped and core prices eased. Investors are more worried about the Q4 numbers than the Q3. The global recession and the stronger dollar could take a big bite out corporate earnings and growth.

The housing market also remains weak with new home sales falling for the fourth consecutive month and existing home sales falling by the largest amount on record. Sharp discounts on new homes is helping to slow the pace of falling demand.

The one piece of good news that we did see this morning was consumer confidence which was revised upwards in the month of December. Given that almost everyone knows someone that has been laid off, the price of gasoline is the only reason to cheer this holiday season. Prices at the pump have fallen close to 60 percent from its summer highs. For drivers, lower gas prices is like a tax cut. At a time when salaries are being frozen and bonuses are being reduced, a tax cut in the form of lower gasoline prices is welcomed with open arms.

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5 Comments

  1. The EUR/USD seems to have established a support range between 1.3939 and 1.3940 for the time being (1613 GMT). Can this pair test 1.3940 and spike to 1.4190 during holiday trades? What is the analysis for the trading days after the New Year holiday?

    Reply
  2. Eric, I don’t think you should expect anything during this December period. A support could be 1.3940,1.3920, 1.3900, almost anything. There is no general pattern because some volume has left the market.

    Less volume means, no real trend, and whipsawing could possibly take place.

    Reply
  3. I was expecting the awful Existing Home Sales figure to weigh on the greenback, but instead, it gained ground. Especially surprising to me was the rise in USD/JPY.
    The thin markets have their mysterious ways…

    Reply
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