The dollar took more hits to end the week, as it fell across the board. There was major volatility with the EURUSD, GBPUSD and USDCHF pairs, while the dollar lost slightly against the commodity dollars. It appears that risk appetite remains as the dominant market theme. This could be a crucial week in trading, as the several pairs are approaching key support / resistance levels � will these levels hold or will the recent rally have enough push for a major breakout?
On Friday, the University of Michigan released the final versions of its Inflation Expectations and Consumer Sentiment reports. The reports showed that consumer sentiment fell for the first time in 5 months, as its reading for July was at 66, down from June�s showing of 70.8. The decline was attributed to rising unemployment concerns. Consumers also expect an inflation rate of 2.9% over the next year, as compared to the 3.1% expected figure last June. It will be interesting to see whether consumer confidence will continue to fall in the coming months. If so, could this dampen market optimism and cause another run to risk aversion? In any case, this is something to keep note of for in the next couple of months � right now, it�s all about risk appetite!
US Fed Chairman Ben Bernanke reiterated prior statements calling for an expansion of the Fed�s powers to have �broader supervisory powers�. Bernanke, along with the Obama administration, has been pushing towards giving the Fed more power to supervise financial institutions so that exposure to systematic risks can be avoided. Some have criticized that this would give the Fed too much power. Can Obama gain enough support to convince legislation to pass this?
Late last night, Bernanke spoke again, this time defending the actions and decisions he has made over the past couple of years. Bernanke said that the economy should stop contracting by the end of this year. He added however, that inflation will remain to be low and that the labor market would not stabilize until early next year.
At 2:00 pm GMT, new home sales data will be available. It is expected that the annualized rate of new sales as of June will rise to 353,000, up from May�s figure of 342,000. This would not be surprising, as June is normally one of the busiest months as families adjust and move before the new school year begins.
Due tomorrow, are the S&P/CS Composite � 20 HPI y/y (1:00 pm GMT), the CB Consumer Confidence and Richmond Manufacturing Index (both at 2:00 pm GMT).
It will be another busy week for Big Ben, as his interview with PBS�s Newshour. The 3 part telecast will begin later at 10:00 pm GMT, with parts 2 and 3 to be released at the same time over the next two days.