Dollar Unfazed by Mixed Economic Data

The US dollar appears to be unfazed by Tuesday 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 Tuesday 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.

Comments

[Moon Kil Woong:]

I think the reason why the dollar didn't fall with respects to other currencies is for fear that what Europe and the rest of the world will do that may be equal or more ridiculous than the US's bailouts, stimulus, and economic mayhem.

I don't think that I am that far off believing that pretty soon the rates across the world will all be 0-0.25%. No one wants their currency to be the strongest one since it's basically painting a giant L on their forehead saying "Failed exporter, please dump your products here."

2008 Dec 24 01:30 AM

[DiggerUK:]

Constructe, I can't see how the world's cental banks can do anything other than reduce rates to 0%.
I am trying to figure out were all the $'s will then go. Back to Uncle Sam?

2008 Dec 26 03:53 PM