US Economy Deteriorates Further

Daily Forex Fundamentals | Written by Investica | Oct 17 08 10:24 GMT |

The dollar will continue to gain some support if credit-related stresses remain at elevated levels, although it will be increasingly difficult to sustain gains as US economic fears intensify. The Euro found support near 1.3350 on Thursday, but was unable to sustain a move above 1.35. The Euro was hampered by a further decline in key commodity prices while there was renewed defensive dollar support when stock-markets fell sharply. The US growth-related data remained generally weak with a particularly alarming Philadelphia Fed report. The manufacturing index dropped very sharply to -37.5 in October from a reading of +3.8 the previous month and this was the lowest reading since 1990. In addition, industrial production fell 3.8% in September, although this was distorted by the impact of hurricanes and the Boeing strike. The data will increase fears that the banking stresses are having a serious impact on the economy. There was some relief in the latest jobless claims data with a dip to 461,000 in the latest week from 477,000 previously, but there will be fears that it just reflects a delay until there is a fresh surge in claims as the economy comes under pressure. Headline prices were unchanged for September while the core increase was held to 0.1%, both slightly below expectations. The data combination will reinforce speculation that the Federal Reserve will sanction a further cut in interest rates, especially as commodity prices have fallen sharply Investica http://www.investica.co.uk Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.