Forex News Blog
Back to The Headlines
Sunday June 8, 2008 - 21:50:30 GMT
Share This Story
FX Solutions - www.fxsol.com
Jean Claude Trichet, President of the European Central Bank (ECB) has
to be a bit surprised at some of his handiwork. The collapse in the
dollar and the Dow and the record rise in crude oil were not all his
doing. Serious supply concerns, Israeli threats, Asian demand and a violent short
squeeze helped drive the oil market to record levels. Non Farm Payrolls
and particularly the unemployment rate, which jumped 0.5% to 5.5% in
May and renewed financial sector worries, slammed American stocks.
But it was Mr. Trichetâ€™s comment that the ECB â€ścould decide to move
rates for a small amount in our next meetingâ€ť that cut the legs out
from under the dollar and started the huge spike in oil prices. No one
in the markets expected such a move by the ECB. When the value of
dollar declines the cost of crude oil, priced in dollars, rises. For
the American consumer, the price of crude oil has a direct translation
into consumer spending. A sustained contraction in consumer spending
will surely push a fragile US economy into recession. The American
economy has a new and immediate threat as oil now seems poised to race
Mr. Trichet has long had a policy of informing the markets of the
internal discussion of the central bank governing board. In letting the
market know that a rate increase was advocated by several board members
and could happen in July he was simply continuing that policy. His
comment was then reinforced by Axel Weber, president of the German
Central Bank and ECB board member when he said that the market â€śseems
to have well understoodâ€ť the â€śstrong signalâ€ť that the current inflation
situation is not â€śacceptableâ€ť. Indeed it did, but at what cost?
Mr. Trichet has often and publicly called for US officials to support
the dollar. Ben Bernanke, the Chairman of the Federal Reserve, finally
did so early in the week and it was one of the reasons the dollar had
reached its highest point against the euro in more than a month on
Thursday. But any positive effect on the dollar from the Fed Chairmanâ€™s
comments was swamped by the adamancy of the ECB.
The ECB is rightly concerned about inflation with the latest harmonized inflation reading 3.6% in May almost double the
bank's target of 2.0%.
But oil and energy prices are one of the main drivers of European and
worldwide inflation. The price of crude had fallen to below $122.00. On
Friday it closed at $138.54. The dollar lost 2.6% against the euro on
Thursday and Friday; the price of oil rose more than 8.4% on Friday
alone. The Thursday and Friday rise in oil on the New York Mercantile
Exchange was a record for the exchange.
The ECB has damaged its own case against inflation. What
will generate higher inflationary expectations more than a sharp hike
in gasoline prices? Would not a sustained 15% or 20 % drop in the price
of oil do more to counter inflation in Europe than threatening to push
a rate increase on a slipping European economy? Will not higher energy
prices further undermine European GDP and fracture consumer spending?
The European consumer should be the beneficiary of a strong
euro with increased purchasing power for foreign goods. But retails
sales in Europe fell unexpectedly 0.6% in April, the fifth fall in the
six months to April. European consumers have historically
underperformed their American counterparts. It seems clear that the
European consumer is more attentive to historical precedent, more
attune to pessimism than optimism. Exactly the opposite of the US
The US economy is weak, payrolls have fallen for five straight
months, but it is not yet recessionary. The total job losses since
January are about what were recorded in one month during the 2001
recession. The unemployment rate rise to 5.5% was likely a product of
an unprecedented number of young workers reaching the job market in May
and skewing the seasonal adjustment to the unemployment rate. (You can
easily see parents of vacationing college students saying, the economy
is weak get out there early and find a job). A portion of the 0.5%
increase will probably return in June. Without this group the
unemployment rate in May would probably have been 5.2% or 5.3%.
But the American economy can ill afford the hit to consumer spending
that will follow a crude oil price of $150 a barrel. The lower the
dollar falls the higher the price of oil climbs. The ECB may have
started an avalanche that will bury their inflation worries in a
Chief Market Analyst
IMPORTANT NOTICE: These comments are for information purposes only.
Past results are not necessarily indicative of future results. FX
Solutions, LLCÂ® believes that customers should be aware of the risks
associated with over-the-counter, spot Forex. Forex trading is highly
speculative in nature which can mean currency prices may become
extremely volatile. Forex trading is highly leveraged, since low margin
deposits normally are required, an extremely high degree of leverage is
obtainable in foreign exchange trading. A relatively small market
movement will have a proportionately larger impact on the funds you
have deposited. You may sustain a total loss of your funds. Since the
possibility of losing your entire cash balance does exist, speculation
in the Forex market should only be conducted with risk capital you can
afford to lose which will not dramatically impact your lifestyle. |
FX Solutions, LLCÂ® assumes no responsibility for errors, inaccuracies
or omissions in these materials. FX Solutions, LLC does not warrant the
accuracy or completeness of the information, text, graphics, links or
other items contained within these materials. FX Solutions, LLC shall
not be liable for any special, indirect, incidental, or consequential
damages, including without limitation losses, lost revenues, or lost
profits that may result from these materials.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."
Actionable trading levels delivered to YOUR charts in real-time.
Register To Test Your Amazing Trader
GVI Trading. Potential Price Risk Scale
Mon 21 May 2018
AA: Major, A: High, B: Medium
AA EZ/CH/CA- Holiday
Wed 23 May 2018
AA 08:30 GB- CPI
A 14:30 US- EIA Crude
Thu 24 May 2018
AA 08:30 GB- Retail Sales
A 12:30 US- Weekly Jobless
A 14:00 US- Existing Homes Sales
Fri 25 May 2018
AA 08:30 GB- GDP
A 12:30 US- Durable Goods
A 14:00 US- Final University of Michigan
John M. Bland, MBA
co-founding Partner, Global-View.com
Global-View Affiliate Program
We are starting an affiliate program to market some of our products.
Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.
Put the word "affiliate" in the email subject line.
Start trading with forex broker Markets Cube
Max McKegg's Daily Forex Trading Forecasts
Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.
Request a TRIAL of Max's Forex Service.