Mixed Economic Data, Dollar Picks Up Strength

The Usd posted slight gains in today's trading session based on stabilization in oil prices under 120. The EurUsd fell over 30 pips to the 1.46 level, while the UsdJpy dropped further, down 70 pips to the high 108 price area. The GbpUsd traded close to yesterday's closing level with a 1.82 handle, and price behavior will probably trend to the downside based on economic fundamentals. Equity markets reversed yesterday's gains due to concerns about a rise in oil prices, and lackluster consumer spending numbers released in the US. Commodities traded slightly lower from the previous close, but the energy sectors remains volatile on worries regarding hurricane activity in the gulf. Bond yields moved marginally higher with the 10yr showing the highest increase at 3bps. Trader's most likely unwound positions in govt. securities as the last of this week's economic data was announced and we are going into a holiday weekend.

Eurozone inflation surprised to the downside at 3.8% vs. 4.0% exp. The gap between wages and prices will have to narrow for consumers to find relief from the recent deterioration in the region's economy. Consumer confidence remains negative at -19 vs. -20 est. which provides further evidence that the overall climate for growth is worsening. Once the correlation between oil and Euro diminish, we could see a breakout opportunity for the dollar. From a technical perspective the tight correlation between the Euro and Oil prices compressed the Usd from further upward momentum. In the UK, consumer confidence came in better than expected but negative at -36 vs. the consensus figure of -41. Cable trading was mostly flat, we hold our bearish outlook with a price target near 1.80.

Personal income fell less than expected at -0.2% vs. -0.7% EST. In addition, consumer spending figures were in line with expectations at 0.2%. Although the reading met market expectations, it was still negative implying that the consumer hasn't fully recovered from the recent slowdown in the US economy. The dollar managed to trade higher towards the end of the trading session, but with light volume and high volatility, not much support was needed to move prices in either direction. Depending on how oil reacts to hurricane Gustav, the dollar should stay rangebound at current levels until volume picks up again.

AC Markets
http://www.ac-markets.com

Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.