Traders Look To Thin Week, Durable Goods And Housing (page 1 of 2)

US Dollar

Dollar strength was absent on the day as traders sided with the growing bias that further rate hike considerations will likely be halted in the world's largest economy. Following last week's rather lackluster schedule of economic data, the decision continues to be dependant on data that seems to disappointing even the consensus figures, let alone market speculation.

That very sentiment loomed over the currency markets, and more specifically the New York session as traders continued to bid the greenback lower. The only piece of data likely to offer some reprieve will be this week's release of the durable goods orders report. Although expected to decline against the consensus and 2.9 percent previous climb, the report should continue to show positive growth in the core figure.

The expected gain may be enough to reverse dollar weakness in the near term, however, further justification would likely be needed for a push higher in favor of dollar bulls. Additionally, plenty of housing sector data will be expected in the rather thinly scheduled week. Both sets of figures are likely to suggest a further pullback in the sector as consumers continue to remain cautious and the most recent string of seventeen increases work their way throughout the economy.

However, taking the cake, traders will be focusing on plenty of Federal Reserve rhetoric in keeping the markets guessing. Scheduled for tomorrow, Federal Reserve Bank of Atlanta's Jack Guynn will be speaking. With the fact that Guynn does have voting rights among the Federal Open Market Committee's overall decision, the market will likely key in on any hawkish comments that may surface ahead of Chairman Ben Bernanke on Friday.

Specifically, Bernanke will likely heed some suggestions when he speaks at the Fed Symposium in Wyoming.

Euro

Growth in the Euro zone boosted other wise dollar pessimism on the day with the trade balance report being released far more positive than most had anticipated. Expected to remain in a 1 billion Euro deficit, the balance of trade printed at a 2 billion Euro surplus. Boosted in the month of June, the report shows that the region is experiencing accelerated growth in light of higher crude oil and commodity prices even as consumer demand and spending remain weaker than policy officials would like to see.

Improvements in the German deficit underpinned the figure with export growth continuing to bolster a rather tepid overall recovery. Subsequently, the report is definitive fodder for interest rate hawks as proponents continue to cite higher inflationary risks due to commodity prices and upticks in manufacturing and the exporting market throughout the economy.

Now with evidence shown through this morning's report, the same interests are magnified as speculators are likely to see a push for higher interest rates in the short term. Currently, future traders are betting on the likelihood, pricing in a probable two more rate hikes before the year end.

However, as before, the notion remains tentative as central bankers are likely to concentrate on the weak consumer sentiment prevailing in the market along with still high unemployment rates. Here, raise rates too high and consumers will likely remain on the sidelines, leaving exports as the only "go to" sector in providing expansion in the third and fourth quarter.

The only consideration, it seems, is the imminent retest of the 1.2900 figure as ECB jawboning is likely to cap any fundamentalist foray into Euro longs.