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EUR/USD Rebounds as Fundamentals Don’t Favor USD

March 16, 2010 by

EUR/USD retraced from the yesterday lows set on the bad signals from Europe. Fundamentals that came out in U.S. today aren’t very positive for the dollar, while the interest rate decision by FOMC didn’t bring any real surprises to the market, but decreased the general risk-aversion, helping such currencies as the euro. The currency pair is now trading near 1.3729 after reaching as high as 1.3776 today.

Housing starts declined from 611k to 575k in February (annual, seasonally-adjusted rate). Building permits decreased from 622k to 612k during the same month. Both real estate indicators were expected to go down slightly more.

U.S. import prices went down by 0.3% in February, following a 1.3% growth a month earlier. Excluding oil, import prices rose by 0.2%. A decline by 0.2% was expected by the analysts. U.S. export prices by 0.5%, following a 0.7% growth in January. Excluding agricultural, export prices decreased by 0.2%.

FOMC has released it’s interest rate decision today, keeping the rates at the previous level (0–0.25%) and stating that last special liquidity program will close on June 30. The some a continued moderate improvement in the economic conditions with the real estate market lagging behind because of the higher unemployment rate:

Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

If you have any comments on the recent EUR/USD action, please, reply using the form below.

2 Responses to “EUR/USD Rebounds as Fundamentals Don’t Favor USD”

  1. Carmen

    Do you foresee import prices continuing to fall over the course of the year? Great blog, by the way.


    Andrei Reply:

    Of course. The global retail demand is going to go down, producers will have to reduce the prices all over the world.


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