Dollar recovered against the euro with markets awaiting the interest rate decision from Federal Reserve on Wednesday.
Dollar recovered against the euro with markets awaiting the interest rate decision from Federal Reserve on Wednesday. It is widely expected that the Fed might cut the benchmark interest rate by 25 basis points but would put an end to aggressive rate cut steps after that.
Though recovered from the all time low levels against the euro the greenback rspanains vulnerable due to persisting worries about the US economy.
Latest data from the US revealed that the Conference Board s April consumer confidence index descended to 62.3 from an upwardly revised reading of 65.9 in March.
The minutes from the Federal Open Market Committee meeting held in March gave a downbeat assessment of the US economy leaving the possibility of further cuts in US interest rates intact. The minutes also showed that many board mspanbers believed a recession in the first half of 2008 was likely amid declining economic growth and financial market stress.
The University of Michigan/Reuters' consumer sentiment index declined to 62.6 in April from 69.5 in March.
Slightly encouraging data from the US Labor market released on last week supported the dollar along with weak German Business Sentiment data that affected the euro.
German Ifo economic institute s business climate index dropped to 102.4 in April the lowest level in two years from 104.8 in March.
According to the release by US Labor Department last week initial claims for state unspanployment benefits fell sharply by 33 000 to 342 000 for the week ended April 19 against the expectations for a modest rise. The four week moving average of initial jobless claims fell by 7 250 to stand at 369 500.
Continuing claims too recorded a fall by 65 000 to 2.93 million for the week ended April 12. But the four week average of continuing claims rose 20 500 to 2.96 million to the highest level since May 2004.
However weakness in the housing market continued as sales of new homes fell 8.5 percent to a seasonally adjusted annual rate of 526 000 in March as per the report by US Commerce Department.
Last week the National Association of Realtors had reported a 2 % drop in sales of existing single family homes and condominiums in March to a seasonally adjusted annualized rate of 4.93 million.
Also according to the Office of Federal Housing Enterprise Oversight US home prices fell 2.4 % for the 12 months ending in February.
Earlier the unexpectedly weak result from the Bank of America had dampened the investors in the banking sector and also added to concerns about the US economy. Bank of America the second largest bank in US reported a fall in first quarter profit due to write downs and rising credit losses.
In a separate release the US Commerce Department revealed the nation's trade deficit expanded unexpectedly by 5.7% to $62.3 billion in February.
As expected the European Central Bank had left the interest rates unchanged while the Bank of England cut its benchmark interest rate by 25 basis points to 5 percent.Medium Term OutlookExpecting a short term recovery in dollar if it sustains below 1.5725 Supports are 1.5909 1.6148 1.6420. Resistances are 1.555 1.5380 1.5220 and 1.5110. But if it trades above 1.5910 more weakness can be expected. In spot dollar closed at 1.5564 (1.5659) against the euro after trading in the range 1.5659 1.5538.Last day DEUR June traded in the range 156.28 155.15 and closed at 155.35 (156.16).
Spot Dollar vs Euro
TECHNICAL OUTLOOK (Intra day)
DEUR (June) Bullish above 155.72 bearish below 155.27
DATA TO WATCH
2008 April 30
ADP Nonfarm Employment Change
Advance GDP q/q
Advance GDP Price Index q/q
Crude Oil Inventories
Federal Funds Rate
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