The currency markets were relatively quiet in the overnight session, compared to the recent spate of volatility seen over the past couple of weeks.  Nonetheless, the greenback continues to remain the currency trade of choice as further conversions come on the heels of a lower Dow Jones Industrial Average.  In the New York morning, the DJIA is now trading lower by 124 points at 8,855.09.  Helping to lend to dour feelings of the economy was the release of the Reuters/University of Michigan preliminary index of consumer sentiment.  Surprising some, the report showed an overall decline to 57.5 from a 70.3 reading in September.  This pales in comparison when taking into account the index average of circa 85 for all of last year.  Beating the consensus estimate of 65, this new piece of economic data really exposes weaknesses in the world’s largest economy, adding to further concerns of an extended recession.  As long as consumption remains thin, any near term recovery remains skeptical at best.  An earlier report on housing starts added to the fire, showing that construction of single family homes in the month was at the worst level in about 25 years, down 6.3 percent for the month.

As a result, the euro continued to sell off for the third straight time, dropping to 1.3433 in the beginning of the session.  Strength in the greenback was additionally seen against the pound sterling at 1.7250 and the Loonie, visibly at 1.1842.  Setting aside a potential end of the week rally, there remains plenty of support at current levels.  Traders continue to eye a third test of the 1.3300 handle in EURUSD.

Next week may pose to be some of the same as several members of major central banks will be testifying to their political or public heads in individual meetings.  Notably, Federal Reserve Chairman Ben Bernanke will be testifying on Monday followed by his counter in Australia.

Tags: Consumer Confidence, Euro, US Dollar

This entry was posted on Friday, October 17th, 2008 at 10:36 am and is filed under Currency Trading, Economic Indicators, Euro, 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.