The US dollar was relatively strong on Wednesday despite the release of worst-than-expect data for the US economy. Apparently, investors bought the US dollar as a safe-haven currency after the US Commerce Department said orders for durable goods fell 2.5 percent in June from a again of 1.8 percent in May. The US dollar advanced against the world’s most heavily traded currencies but the gains were more noticeable against higher yielding commodity currencies. For instance, the Australian dollar lost nearly 100 pips against the dollar to trade as low as .8126 from a high of .8377 on Tuesday. In addition, the dollar rallied more than 70 pips against the export-dependent Canadian dollar after the release of inventory numbers by the American Petroleum Institute triggered a sudden drop in oil prices. Indeed, less demand for energy commodities is a clear symptom that not everything is well with the global economy. The US Treasury Department and the Federal Reserve have been taking a number of actions to increase liquidity, stabilize financial markets and boost the demand for housing by keeping interest rates at a record low. However, the US economy risks entering a double-dip recession should politicians continue to waste money in pet projects instead of making real reforms. Looking ahead, the current model of economic growth is not sustainable because is purely driven by stimulus plans paid by tax-payers money and we may be on the brink of a major bearish turn in stocks, commodities and higher yielding currencies.
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