Dollar struggles again after latest job, housing news

By Pete Southern in LiveWire Economics Blog | January 13, 2010 19:45 |

Exchange rates have not been favorable for the US dollar in the early part of the week as the greenback has been hit again following disappointing news of late on the job and housing sector fronts.

A Euro is currently worth $1.4566, well above the $1.43 price point it entered the year with. The British Pound is also slightly higher from its 2010 starting position with a current exchange rate of $1.6286. Both the Euro and the Pound made significant jumps early Wednesday (January 13) morning after hawkish commentary from a Bank of England official.

The dollar is also down about two pips, with a current rate of 91.245, against the yen. Most of the net losses for the dollar on the year have come in the last 5-6 days as housing and jobs, two key sectors of the economy, have become a concern again.

Housing has been a closely watched sector of the economy since it was a major catalyst of the downturn. Though consistently improving over time, housing still has yet to demonstrate solid and relentless improvement with regard to existing home sales and new starts.

The more closely watched area of the economy heading into 2010 has been the jobs sector. Top economists have said for months that unemployment would peak around 10 per cent early in 2010 before receding later in the year. So far, they appear to be on track, as unemployment hovers right at the 10 per cent level.

The number of job cuts has been declining significantly in recent weeks and months, but an unexpectedly weak report on the job market late last week was the major catalyst for the current dollar swoon.

Dollar movements are sure to be swift and emotionally charged with every significant positive or negative report as the US looks for economic stability. Most exchange rates charts appear to show a turnover in trend direction, though, which favors a stronger dollar in the medium and long terms.

Most top analysts have also suggested that 2010 should be a good year for the dollar as it looks to reverse direction against many of its major competitors. The dollar has been beaten down because of the slumping economy and a zero interest rate policy by the Fed.

These two influences are likely to change hand in hand moving forward. As soon as the Fed feels very comfortable that the economy is back on solid ground, it would likely move in to increase rates in order to prevent any potential for inflation.

Pete Southern About Pete Southern
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.

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