Most analysts reckon that the USD has resumed its downward path against the world’s major currencies, after a two month hiatus. The fear is that the mess in the real estate market (via subprime mortgages) will spread to the rest of the economy, with loan defaults and a decline in consumption. In such a case, the Federal Reserve Bank would be forced to cut interest rates dramatically in order to prevent the US from sinking into a full-fledged recession, which would decrease the relative attractiveness of US assets. Traders will be eying a couple pieces of economic data this week for any indication as to the direction of the economy.
The Wall Street Journal reports:
This week’s data parade is bracketed by two key releases: Monday’s national report on U.S. manufacturing activity in March from the Institute for Supply Management and Friday’s payrolls report.
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