Daily Premium Analysis

USD

The USD slipped and fell against many currencies yesterday on data showing new home sales fell to 848K with the previous revised at 882K. This result has been the lowest since June, 2000 and its effect has boosted expectations that the U.S. Federal Reserve Board till cut its interest rate.

Analysts continued by saying that data was quite a turnaround from expectations. In fact, earlier in the session, some economists were referring to Friday’s existing home sales’ positive outcome claiming that the worst of the housing market slowdown was over.

Countering existing homes data seen last week, the new home sales figure widely disappointed the market and confirmed the fact that home construction weakness is likely to linger over the economy. Perhaps with the Chairman of the U.S. Federal Reserve, Mr. Bernanke, scheduled to speak before the Joint Economic Committee on the outlook of the economy, this unease will be addressed.

Although committee members will look on the consequences that the housing market may have on future growth, very little is expected to change from last week’s Federal Open Market Committee (FOMC) meeting. Only if Mr. Bernanke chooses to paint a different picture from the data, the USD may return to its early Monday trading strength.

In other U.S. economic news, crude oil rose by $0.63 a barrel to $62.91. This was amid tension in the Gulf with Iran over its developing nuclear program as well as holding 15 British navy personnel.

Stay posted for this afternoon’s consumer confidence report. If the forecast is accurate and confidence will drop, watch for a USD reaction on all the majors.

EUR

In addition to bad housing data which motivated the EUR/USD back up to 1.3330 trading level, the market was optimistic following Euro releases as well. Firstly, the French business confidence survey rose unexpectedly to a one year high of 109. The survey was combined with French production outlook results helping the EUR to gain further ground against the USD.

Although yesterday’s releases are only a handful, they nevertheless managed to boost speculation of a better than expected German IFO scheduled for early this morning’s European session. With both the current and future assessments to remain at par, there is evidence of a better outcome. Data shows strong factory orders, as compared annually, while industrial production continues at 1.9% pace.

Overall, European ministers revised their previous warnings that the economy would have irrevocable damage as a result of further rate hikes. Countering previous concerns over higher costs imposed by rising interest rates, policy makers are now noting robust growth in the region. This sentiment coupled with a high EUR may help support further rate hikes in the near future.