ministers will support the strong dollar policy to tame inflation. Nonetheless, as they avoided exchange rates comments in the meeting their focus remained on slowing global economic at the rear of the credit crisis and as well some confronted their fears of the effect of inflation and commodities on dampening growth, yet still no direct address was devoted to propping the dollar.
Thought the support was not expected, yet that was not directly effective on exchange markets, as G8 comments fell short of expectations yet did little to weaken the dollar, as it still obtained the support of the American dollar policy and expectations to the upcoming reverse to policy easing, as they fear rising inflation as the economy escaped deep contraction fears.
The economy is now approaching the designed period according to the fed plan to start manifesting rising growth, which that they reiterated that will be seen in the later half of the year. Economic fundamentals from the US economy have provided markets with optimism regarding growth especially as Americans are spending more of their rebates than previously anticipated which in role will support GDP growth and help ease swelling inventories and prompt business to raise production, while gradually the sentiment in the economy regains ground.
Though now fears are concentrated upon two aspects regarding the U.S economy which are, first commodity induced inflation and second the creation of a solid bottom for the housing market. For that this week marks the delivery of market expectations is set to continue as the sequel to inflation data the PPI will clarify the picture further and Housing Starts report is to determine the state of economy, combined with that is leads on industrial performance and by that we will mainly be covering major highlights as we grow closer to the FOMC decision.
The start today is to be with NY Fed Manufacturing Index for June as the drop is expected to ease to -1.4 after -3.2 in May, though that shows eminent weakness prevailing yet now any sign of improvement is overrated for the U.S economy. While other data on the queue is to reflect markets approach and faith in U.S securities which is used to cover the trade deficit, as Net Long TIC Flows for April are projected to be sufficient to cover the gap though slowing to $63.3 billion after $87.4 billion.
Starting this week is rather mild, though the data to be provided within is to grab the attention. Fears of inflation and inflation expectations if to materialize will surely prolong the economy's rise and now since Crude has taken the downside trend with Saudi's increased capacity induced into the market we have to assess how long will that last and how much will it provide in easing inflation since still soaring food costs have yet to find a solution.
Rest a shore the with the end of the G8 meeting with no strong rhetoric to enforce a soon to be seen intervention, now fundamentals will be back to define supply and demand factors in exchange markets and set the race for bulls and bears to bet once more on whom will conquer the lead, as risk appetite is now strengthening after markets had their share of consolidation, so let the best be the winner...