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The US dollar just had its third weekly decline against the Euro as rising oil prices and weak home sales threaten to prolong and deepen the US economic downturn. The dollar fell to the lowest level against the Swiss franc in a month, and its weekly drop was the largest in two months. Both Wall Street and Main Street are confronted with the big blow of record oil prices being traded every few days or even consecutive days. Last Thursday, oil hit a lifetime high of $135.09 a barrel on the New York Mercantile Exchange, and in the last nine weeks, oil has risen in eight of them. Americans starting their Memorial long weekend won’t be happy to know that the nationwide average retail price of gasoline went up to a record of $3.875 a gallon, according to the AAA on Friday.
The US, being the world’s largest importer of oil, may see its economy suffer more if consumers are forced to reduce their spending of non-essential items in light of rising food and fuel prices since 2/3 of its economic growth is driven by consumer spending. We are still not getting positive news from the US housing sector: sales of existing homes fell for a second month in a row in April, and inventories of unsold homes grew 11%. At this current rate of sales, it would take at least 11 months to get rid of the unsold existing homes.
Eurozone’s Prospects
Eurozone economic prospects are looking shaky too. Last week the Eurozone Purchasing Managers Index data came in weaker than expected, showing that activity in the Eurozone economy dropped to its lowest level in almost five years in May. With regards to the Euro, European Commissioner for Economic and Monetary Affairs Joaquin Almunia said Friday that policymakers around the world are concerned about the strong Euro.
He said, “There is concern…there is concern that we see every time there’s a meeting of Group of Seven (leading industrial nations) or the International Monetary Fund. There is concern because excessive volatility is bad for everyone.”
The US dollar sentiment looks rather bearish in the near-term. Both the US and UK markets will be closed Monday, and trading volume will be very light, so beware of exaggerated unexpected moves in the currency markets.
Sunday:
New Zealand trade balance 2245 GMT
Monday:
US, UK markets are closed
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What an adventure, traveling the world and trading FX!
Grace, I have watched a few of your videos, and even started a little thread about your adventure on my website.
/see: http://www.greenenergyinvestors.com/index.php?showtopic=3237
It might be interesting, if you would chat with a few people that you meet on your travels, and ask them how they are coping with high oil prices and inflation. My own view is that Americans will wind up getting hurt most by rising oil. They are amongst the biggest users per capita, America has far too many suburbanites, and a falling dollar will insure that oil prices rise faster in dollar terms, than in stronger currencies.
The rise in dollar oil is one way that the markets are communicating an essential message to the US: You must change your living arrangements, and use far less oil.
POP IN, and visit us on GEI sometime.
Best wishes, Dr. Bubb