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Economic Indicators

Euro retreats from 2009 Highs

In forex, timing is everything. If I had written this post a couple weeks ago, the headline would read “Euro Touches 2009 High.” Perhaps if I had waited another week, it would have read, “Euro Approaching 2009 High.” But alas, I chose today to write about the Euro, and the headline I chose is probably the most appropriate under the circumstances.

The Force is With the Yen

Just when it looked like the carry trade was back for good and all signs pointed to a Yen depreciation, out of nowhere came a series of surprise developments, propping the Yen back up. Spanning finance, economics, and politics - a Forex Trifecta - these developments moved swiftly through the markets, creating optimism for the Yen where before there was only pessimism. Of course, it’s possible that this bump will prove temporary, and a reversal could transpire just as quickly.

Brazil Real Edging Up, Despite Efforts of Central Bank

The Brazilian Real has been one of the world’s best performers in 2009, having risen by a solid 25%. The currency is now close to pre-credit crisis levels, and is even closing in on an 11-year high. When you consider that only six months ago, most analysts were painting doomsday scenarios and predicting currency devaluations and bond defaults for the entire continent, this is pretty incredible!

Korean Won Rebounds Strongly

Last year the Korean Won was one of the world’s weakest currencies- and that’s saying a lot when you you consider how many currencies tanked at the onset of the credit crisis. The Won lost nearly half of its value, driven by concerns that Korean creditors would be unable to pay their foreign debts. Since March, however, the currency has rebounded by an impressive 25%, as the government took action: “To avert a crisis, South Korea forged a dollar-swap agreement with the U.S., pumped money into the banking system, boosted fiscal spending, set up funds to replenish bank capital and cut rates.”

British Pound due for Correction, Thanks to BOE

The British Pound’s rise since the beginning of March has been nothing short of spectacular: “Improving economic data have helped the pound advance 14 percent against the dollar this year and 12 percent against the euro.” Due primarily to a recovery in risk appetite and the concomitant belief that the Pound had been oversold following the onset of the credit crisis, investors began pouring hot money back into the UK. As recently as two weeks ago, one analyst intoned that, “Longer term, we are in part of an uptrend for the pound. I don’t think this is over.”

Dollar Reverses Course

A recent WSJ headline reads, Good Economic News Threatens the Dollar, and summarizes the Dollar’s trading pattern as follows: “Demand for the U.S. currency continues to erode amid a tide of more encouraging economic data and corporate earnings that have fed a thirst for riskier assets such as stocks, commodities, and growth-sensitive currencies.”

The US Housing Market and the Dollar

As reported today by the Mortgage Calculator and other sources, the US housing market could be in the early stages of recovery. “Nationwide, home resales in June are up 9 percent from January, on a seasonally adjusted basis. Sales of new homes have climbed 17 percent during the same period. And construction, while still anemic, has risen almost 20 percent since the beginning of the year.

Pound: All Indicators Point to Down

If an investor only read the story, Pound a Buy Before ‘Steep’ U.K. Recovery, they could be forgiven for assuming that the fundamentals underlying the Pound must be strong enough to just such a bold claim. In fact, virtually all economic indicators are trending downward, and most analysts (with the exception of the source behind the above story) are revising their Pound forecasts proportionately.

Inflation Update: US Prices Creep up in May

The debate over US inflation continues to be waged- in academic circles, among economists, and in the financial markets. There is no still no clear consensus as to the likelihood that the inflation will flare up at some point, as a result of the Fed’s easy monetary policy and the government’s record budget deficits. While the unprecedented nature of this crisis means that such a debate is still a matter of theory, that hasn’t stopped both sides from weighing in, often vehemently.

British Pound “Pauses for Breath” [Part 1 of 2]

After a nearly 20% rise against the Dollar, the British Pound has been rangebound for nearly the entire month of June, with one columnist likening the situation to a “pause for breath.” For him, this amounts to a temporary cessation on the Pound’s inevitable upward path: “Compared to long term levels, the pound was still better value than its peers. He said: ‘It’s still cheap - about 10% below it’s trade-weighted average at present.’ ” For others analysts, however, the picture is not so cut-and-dried.

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