The U.S. dollar had been buoyed by a host of factors, including: easing of concerns that Fannie Mae and Freddie Mac would fail, a pullback in commodity prices, and weak European and Japanese economic data.
However, as the last full week in July drew to a close, the greenback lost its momentum as financial fears were rekindled and data shows that the U.S. housing market has not yet bottomed.
While some consolidation may be seen, for the U.S. dollar to be generally firm in the weeks ahead, though recognize its sensitivity to developments outside the range of visibility that drives oil prices back up or heightens perceptions of systemic risk.
One of the key factors that have contributed to the dollar has been the under-performance of the U.S. economy and the rates cuts in response. We think that the news stream is improving in this regard. In fact, it is possible that the U.S. economy was the best performer in the G7 in the second quarter and could be doing it again here in the third.
Source : Realmoney.com
