TICS no Help to The Dollar

Despite the much better than expected TICS report which printed at $86 Billion from $60 Billion expected, the dollar saw relentless selling all day long yesterday trading to within a whisker of the 1.2300 level. For greenback bulls this disconcerting pattern of ignoring strong economic data must be frustrating at the very least.

Lately when it comes to the dollar the FX markets standard response has been to "accentuate the negative and eliminate the positive". One possible reason for this shift in sentiment may be a growing concern about the escalation of geo-political risk.

Iran's incendiary rhetoric regarding the nuclear stand off with UN as well as last night's suicide bombing by Hamas in Israel have raised tensions in the Middle East considerably. As oil tops $70 per barrel and gasoline approaches the $3.00/ gallon price point the markets may be discounting any good news out of the US for fear of an impending slowdown in consumer spending.

Aside from the PPI data due out later today, the housing reports could have an impact on FX trade especially if the results print worse than expected. For the past few months the currency market has been sensitive to US housing data and if today's numbers show a material slowdown in starts and building permits the greenback may be in for more pain. With housing responsible for fully 25% of GDP growth since 2002, a serious contraction in the sector is likely to result in a slowdown of the overall US economy as well.