Dollar Sentiment Largely Unaffected by Today's Data

The US dollar is slightly down against major currencies like the Euro, Swiss franc, British pound and the Japanese yen Thursday.

To everyone’s surprise, all is not gloom in the Eurozone. France, which is Eurozone’s second largest economy, reported today that its gross domestic product grew 0.6% in the first quarter, double that in the previous quarter, and better than the 0.5% growth expected. Even though the high Euro is hurting exports to some degree, export growth is still robust despite economic uncertainty.

As for US economic data Thursday, it has been a bit disappointing, but doesn’t change the picture of a slowdown in the US. US industrial production fell 0.7% in April, following a revised 0.2% climb in March (was 0.3% in March). This drop was worse than the 0.4% drop expected. Another weak manufacturing report came from the New York Fed survey, which showed that the general business conditions index tumbled into the negative territory of -3.2 in May, compared to a positive 0.6 reading in April. Many had expected the reading to come in at 0.0, and not dipping into the contraction region. However, the Philadelphia Fed manufacturing index, which was the last economic release out for the day, came out better than expected, though still signaling contraction, with the headline index at -15.6 compared with a previous -24.9 and expectations centered around -19.5.

Hammering Euro Down

International Monetary Fund Managing Director Dominique Strauss-Kahn said Thursday the Euro is carrying “a bigger share of the burden than it should have” in the current climate of foreign exchange volatility. He said foreign exchange rates were one of the “big imbalances of today’s world." ECB’s president Trichet said Thursday that second quarter growth will be less flattering than first quarter. EuroGroup chairman Juncker repeated today trends in the US dollar (that is, the current dollar uptrend) are pointing in the right direction.

Forex Trading

Despite the overall slight negative tone of US data today, dollar losses have been very limited. Euro did not gain much versus the dollar; EUR/USD went up to 1.5560, met resistance there and then fell back below 1.5500. If it falls below 1.5450, it may target 1.5400. USD/CHF fell to a session low of 1.0480, and is still capped by 1.0600.

Friday:

Japan industrial production 0430 GMT

Swiss retail sales 0715 GMT

US housing starts 1230 GMT

U of Mich confidence 1400 GMT

Comments

[special1person]

"To everyone’s surprise, all is not gloom in the Eurozone."

Hahaha! Good one!

Yeah, those "Frogs" have it tough over there, all right.

They got either the Number #1 Best Health Care System (or is it #2) in the world that covers 100% of it's people with little or no out of pocket expense.

If you consider the vacation time, "Frenchies" make more per hour than Americans.

It's a tough, gloomy life, all righty.

Betcha they can't buy "Two Buck Chuck" over there!

Take *that* Eurozonies!!!!

[Coelacanth]

You're right on the mark Gracie.

Gotta admit I was surprised by the flash GDP numbers out of Germany & France last night. I do think growth will slow eventually.
Germany is in better shape than France

The French have to reign in public spending. Their public spending deficit is on track to eat up an astonishing 64% of GDP in 2008. Highest in the euro-zone. No wonder the EU is badgering them to get their financial house in order before assuming the rotating EU presidency in July.

[SOTOS]

Grace i don't know why....but i smell a huge sudden drop for eur/usd....till 1.3800