Forex Investment and Currency Trading

USD
Event risk: Mixed messages from the chain-store data but broad recessionary conditions and 4 consecutive falls in retail jobs suggest downside risk to consensus calling for a 0.2% rise in core retail sales (Mon). The ECRI leading index hints at still more potential downside for the Empire survey (Tue) and Philly (Thur). A 7%+ fall in Feb permits warns March housing starts (Wed) could fall sharply too. The Fed’s Beige Book (Wed) is likely to be peppered with anecdotes of yet more slowing in activity while the core CPI (Wed) should bounce back from an aberrant flat outturn to [...]

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The USD hovers near record lows versus major currencies, with little prospect for near term improvement. While recent Fed actions may help to stabilize financial system concerns, there are increasing signs of US economic weakening. The Chicago Fed National Activity Index has fallen to levels normally associated with recession, and additional FOMC easing
is likely to push the USD index to new record lows during 2Q 2008.
Residual economic momentum and stubborn headline inflation suggest stable ECB policy through at least the next few months. Strong interest rate support has helped push the EUR TWI (BoE index) to within 1% of its October [...]

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The UK economy continues to display surprising resilience to the US slowdown and the global credit crunch giving the Bank of England (BoE) greater leeway to separate its monetary policy response to moderating growth from its actions to provide liquidity to stressed financial markets.
Retail sales surged 1.0% mom in February despite expectations for a modest fall of 0.2% mom. Moreover, the January advance of 0.8% mom was revised up to an even more buoyant 1.1%. Despite a number of apparent headwinds bearing down on UK households, consumer spending continues to hold up in early 2008. The January/February average of sales [...]

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