June 15, 2012
And the Biggest Loser is... The Greenback! Weak economic data from the U.S. triggered another sharp dollar selloff yesterday as traders priced in the increased odds of QE3. Will the Greenback have a chance to redeem itself today?
U.S. inflation data came in weaker than expected yesterday as the headline CPI posted a 0.3% drop in price levels, larger than the estimated 0.2% decline. The core figure, on the other hand, came in line with consensus of a 0.2% uptick but still reflected a slowdown in inflation. With that, the Fed could have more room to implement further easing, especially since other economic data show that the U.S. could definitely use some stimulus.
Weekly jobless claims also came in worse than expected, with the reading chalking up a 386K rise in first-time claimants. This was higher than the previous week's 380K reading and the consensus of 377K, showing that the jobs situation isn't exactly improving in the country.
Their current account balance also came in the red as it printed a 137 billion USD deficit, wider than the estimated 132 billion USD shortfall and the previous month's 119 billion USD current account deficit. This first quarter reading was the largest deficit in three years.
Today, the U.S. is set to print its Empire State manufacturing index and its University of Michigan consumer sentiment reading. The manufacturing index is slated to show a drop from 17.1 to 13.6 for June while the consumer sentiment report is expected to fall from 79.3 to 77.5, both of which reflecting a downturn in economic performance. Another round of weaker than expected figures could be the nail in the coffin for the Greenback as this would increase the likelihood of QE3 from the Fed next week, so stay tuned for these reports!
"The only cable I watch is the pound baby."