It was US dollar strength again on the session as equity markets were led lower to test monthly lows and the dollar index climbed to highs not seen since December of last year.  Although holding steady against the pound, USD advances were notably made against the Japanese Yen and Euro.  Leading the bearish charge lower were continued concerns over the global financial crisis as further economic news helped to batter down any hopes that a reversal is soon coming.  According to the Federal Reserve Bank of New York, manufacturing in the New York area contracted to a new low of -34.7 in the month of February.  Although the headline number was widely pessimistic, the detailed tidbits helped to keep equity bulls out of the picture.  A majority of the survey continued to see further deterioration in the economic front with the new orders component dropping to a new record low.  Sentiment now resides in the fact that the national factory survey, ISM, for the month will also show further slowdowns and counter expectations that the worse may have been over.  A silver lining glimmered, albeit for only a second, as President Obama signed into law the American Recovery and Reinvestment Act.  The biggest stimulus package of its kind since the days of the New Deal, the act is expected to help stimulate the world’s largest economy.  However, ecstasy over the signing was short as market participants continue to see the plan as inadequate considering the global reach of the current downturn. 

Euro Drops On Eastern Troubles

Woes continued to keep the Euro weakened as concerns swept European banks with Eastern European subsidiaries including Austrian and Swedish economies.  Mainly, the concern stems from similar systemic fears that caused negative effects in the US and other global economies.  The region’s creditability is in such dire straits, it has prompted ratings agency Fitch to downgrade Ukraine’s debt to B, applying a negative future outlook on the country.  Should credit stability concerns continue to surface, the single currency will likely continue to show considerable weakness against the USD in the long term.  However, the euro did receive a short reprieve form the two day slide as investment sentiment improved in the region.  According to the ZEW economic survey, future expectations of a better future ticked higher to -5.8 versus the previous -31 plunge.  Although the current assessment continues to anticipate recessionary times, survey participants expect a reversal of fortunes in the member states. 

Japan’s Recession May Be Worse In Three Decades 

Surprising market participants in the overnight, the Cabinet Office released quarterly gross domestic product that showed a more dire picture of the economy.  According to the report, growth in the world’s second largest economy plunged a worse than expected 3.3 percent as a drop in exports drove contraction.  The worst print since 1974, the report now places a heavy hand on further reports in the near term as pessimism is likely to keep the currencies and equities in the region trading lower in the meantime.

Past Forex Trading Articles covering the Stimulus Plan

10 Ways the Stimulus Plan Can Save the Dollar

2009 Stimulus Package Helps Dollar

Dollar Gains on Stimulus Plan Doubts

Tags: 2009 Stimulus Package, American Recovery and Reinvestment Act, Empire Manufacturing, Forex Commentary, Japanese GDP, obama, US Dollar

This entry was posted on Tuesday, February 17th, 2009 at 8:43 pm and is filed under Currency Trading, Economic Indicators, Euro, Japanese Yen, Stimulus Plan, US Dollar. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.