US Dollar Down on Mounting Consumer Pessimism (page 1 of 2)

US Dollar - The US dollar was widely lower following a rather lackluster consumer confidence number released in theNew York morning. According to the Conference Board's index, consumer confidence dipped to 107.2 from a five year high of 112.5. Leading consumer pessimism were concerns about the recent housing sector weakness, equity benchmark declines and higher energy costs. However, one component that lent a silver lining was the labor market component. Rising to 30.5 percent, the share of consumers stating that jobs were plentiful advanced the highest since August 2001. Although this fact should have lifted the dollar, the overall tone remained bearish as the headline index will likely keep the Federal Reserve considering a near term rate cut rather than a rate hike. Subsequently helping the dollar lower in the New York session were comments made by Federal Reserve Bank of Chicago President Michael Moskow. In a speech to the Central Party School No. 100 in Beijing, China, Moskow remarked just a week after the central bank's decision that further economic data would be widely considered by central bankers. This fact alone would dictate the Fed's next monetary action as the central bank has now officially dropped the "additional firming" clause in interest rates. "Whether policy will need to be adjusted and the degree of any adjustment will depend on the data we see in the months to come and how that data influences our forecast of the economy". However, the Chicago Fed chief did profess that inflationary pressures have been "stubbornly high" and continues to exceed 2 percent for the near term as labor markets remain tight. The proof was in the pudding as the Fed's preferred measure, the personal consumption expenditure figure, rose 2.3 percent annually in recent postings. Ultimately, traders concentrated on the absence of a clear monetary bias, siding with the negative confidence report in taking dollar weakness.

EURO - Boosting the euro slightly higher against the pound and the US dollar was an unexpected rise in German business confidence for the month. According to the Ifo institute, confidence among 7,000 German executives rose to 107.7 in March from the 107 witnessed in the month of February. The results counter negative sentiment supported by a previous dip in the Belgian business confidence survey witnessed last week as well as concerns of the heavier VAT tax. Previous estimates forecasted lower growth and confidence going forward as a result of the increased sales tax in the beginning of the year. However, now with the effects seemingly limited, businesses are looking forward to near term growth. Today's results will now be placed juxtapose a la advancement in industrial production and exports, both which continue to power the Eurozone's largest economy. Coincidentally, the report's optimistic results come a day after a EU commission estimated robust growth in the region. Both are likely to help in supporting further rate hikes by the ECB and its hawkish president Jean Claude Trichet in the near term.

British Pound - The British pound was hit by the case of the jitters today as traders pared back some exposure to the supported sterling. Sparking the mild selloff in the overnight session were comments by none other than Bank of England Governor Mervyn King. Speaking to parliament with four other members of the Monetary Policy Committee, King stated that a slowdown in the housing sector is starting to emerge as a result of the past three rate increases but noted near term stability. "If house prices were to fall by a relatively modest amount, I don't think the consequences would be very severe", answered King when making comparisons to subprime concerns currently looming over the US economy.