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In the past week we saw some weak economic data from the US, but ‘weak’ isn’t a bad thing, putting it in the context of a country (which is the US) that is facing a big crisis in many decades. The more important thing is that last week’s data relating to GDP, durable goods orders and consumer sentiment, wasn’t that terrible, and in many cases, better than what other economists had predicted. The US dollar had its biggest weekly rally against the Euro and Swiss franc in a month in last week’s holiday-shortened week, and even managed to close higher versus these two currencies for the second month in a row.
Some Fed officials said last week that the current monetary policy is “appropriate”, and they also voiced their concerns about inflation in the US. We think the Fed is basically going to keep interest rates on hold for quite some time. There isn’t any urgency to raise rates either. Friday’s US inflation data showed that core inflation measure climbed 2.1% in April year-over-year, and even though that is slightly above the Fed’s upper target of 2%, it isn’t that threatening.
Net Short In Euro Contracts
Large speculators have been shorting the Euro in the currency futures markets, and their actions were vindicated by the weak German retail sales and higher-than-expected Eurozone consumer price inflation. In the latest Commitment of Traders report, large speculators shifted their positioning from long Euro to short Euro in the week ending May 27, resulting in 3390 contracts in the net short territory, while total open interest has increased. For the same week, small traders were net long, and so were proven wrong.
Next week, keep a lookout for the US ISM manufacturing and US non-farm payrolls.
Monday:
German, Eurozone PMI 0800 GMT
UK mortgage approvals, PMI manufacturing 0830 GMT
ECB’s Trichet, EU’s Juncker and Germany’s Merkel speak 1330 GMT
US ISM manufacturing, construction spending 1400 GMT
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It will be a MAD week, trust me. By the way, nice video grace!