Dollar Looks To Employment Data

The dollar's ability to extend the current recovery will be strongly influenced by the US employment and GDP evidence over the next 48 hours with in-line data likely to secure a slightly firmer dollar bias.

The dollar found support close to 1.5750 on Tuesday and gained sharply in US trading with initial support from a renewed decline in commodity prices with crude at a 12-week low. The US currency also gained backing from a recovery on Wall Street and Merrill Lynch capital raising. There was a peak close to 1.5550 with a one-month high on a trade-weighted basis.

The US data continued the pattern seen at the end of last week with a slightly firmer than expected tone. Consumer confidence edged up to 51.9 in July from a revised 51.0 the previous month. Gloom persisted over current conditions and the index remained at historically depressed levels, but there was a slight improvement in the expectations component.

The Case-Shiller house-price index was also slightly better than expected with a 15.8% drop in the year to May. There were sharp declines in several cities notably in California and Arizona, but 7 of the 20 cities recorded a monthly advance in prices which suggests that the difficulties are becoming more regional in nature. There will still be caution ahead of key economic data over the second half of this week with a particular focus on employment trends

Investica
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