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Wednesday, July 14, 2010
Forex Special - US economy is on the spending track, trying to stimulate consumers back into massive buying, as Economics Nobel Prize winner Paul Krugman put it: “Spend now, while the economy remains depressed; save later, once it has recovered”. But the US Retail report, after four months of gains, dropped 1.2% in May, and is expected to shed another 0.2% in June.
Kathy Lien, Director of Currency Research for GFT, lists some of the setbacks bringing concern over the real state of the US economy and its currency: “Recent reports show the housing market has taken a turn for the worse while manufacturing and service activity have slowed. Private sector payrolls continue to grow but the economy as a whole has returned to net job losses”.
The US Retail Sales report, will be the Rosetta stone clarifying the outlook for the USD, as Kathy Lien concludes: “Consumer spending is the missing link to this whole puzzle and if American consumers are still spending, then these worries are overdone. However, if consumers cut spending for the second month in a row, like the market expects, then the dollar could be headed for big trouble.”