Intraday Market Thoughts

Buck Slumps on Obama Spending Plan

by Adam Button
Aug 17, 2011 23:40

The US dollar fell Wednesday on reports that Obama is preparing a stimulus program including tax cuts and infrastructure spending. AUD was the top performer followed by CHF and GBP. Japanese trade balance is the lone indicator in the upcoming session.

Various media reports suggest Obama will unveil plans to kickstart the economy in a speech on Sept. 6. Details appear to revolve around tax cuts for small businesses, infrastructure spending and longer unemployment benefits.

Plans to cut $1.5 trillion from the deficit over the next 10 years arent said to be affected but the steps Obama appears to be taking will do nothing to impress the ratings agencies or convince the market that the US government is serious about austerity.

At the same time, spending and lower taxes are probably what the US needs to do in order to stimulate growth. The advantages to further stimulus will be reflected positively in commodities, including commodity FX and precious metals as well as stocks.

The rumours from the White House outweighed commentary from the Feds Plosser and Fisher, who both dissented at the most recent FOMC meeting. Plosser talked up the US economy, especially fro 2012, but hes not working on much of a track record. Were guessing he thinks its the Feds job to inspire confidence. His said the Fed could hike before mid-2013 but the market was unmoved. Fisher was more constructive, saying its not the Feds job to protect the stock market and that Congress needs to do more for the economy.

Economic data showed that US core PPI expanded 0.4% in July compared to the 0.2% expected. Weekly data on US crude inventories was bearish but WTI crude climbed 1% to $87.56.

Gold settled at a record $1794 but silver outperformed to gain 1.3% and climb above $40. The S&P 500 gained 0.1% to close at 1194.

Japanese trade balance at 2350 GMT is expected to show a 120 billion deficit, similar to the 190 billion deficit in June. It will be the fourth consecutive deficit but the past three deficits have all been smaller than expected. Dont expect to see a significant reaction in JPY.


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