Thursday, July 05, 2007
As the US motored into the busiest driving season of the year Black Gold moved through $71 a barrel on Nymex trading. The consequences of this move includes $4 a gallon Gas, and increased energy costs in the near future, if these prices hold.
Is the US consumer so embattled with day-to-day living pressures that this amount will be accepted as a price to pay to go about their daily routine?
The US consumer has shrugged their shoulders at the grocery check-out as weekly food shopping goes though $200 for the average family, sighed in despair as the Energy bill increased by 18% year-over-year, accepted meekly an increase in most household bills this year, and put their head in their hands over increasing mortgage payments from Adjustable Rate Mortgages that have just increased the average monthly payment by close to $200.
There is not a lot wrong with an economy that is able to ignore these inflationary pressures, and goes on to show expansion in the Manufacture and Service industries. It is a sign that the US consumer has accepted having to work harder to stay in the same position, and also shows that there is obviously enough economic expansion within the economy to possibly contain those fears. After all, Europeans pay close to $8 a gallon, so this is cheap in comparison, but how long before the consumer reacts in the US by tightening the purse strings? Something has to give, and at the moment it is not Oil prices, so will the US consumer step up and continue to pay increased prices? If they will then the economy has few things to be concerned about, outside of housing.
Higher Oil prices pressure the $, anything over $60 a barrel tends to impact the Greenback, and that has probably helped the $ weaken over the last few trading sessions.
The reasons that the US$ Index has been pushed to all-time lows may not be just from Oil prices and the housing market, moreover it is likely due in part to Global Business Cycles. The Major currency Pairs have economies that are in a Peak of their economic Business Cycles, at the same time that the US is coming out of a trough. That allows the $ to lose value quicker than it would if the US Business Cycle was also at a peak.
The UK, Euro Zone, Switzerland, Australia and New Zealand are all at the top of their economic cycles, they have all increased interest rates to stem inflationary growth, and they may be starting to see the impact of those increases in a slow-down during this summer. The fact that the US has already been through that slow-down phase, and is looking at expansion, may strengthen the $ over the coming months, so long as the Fed can contain the housing sector damage.
A weak $ is not a reflection of a weak economy, outside of the housing sector there are inflationary pressures in energy costs and wage demands that have the Fed's attention. The moment that a housing report prints positive the $ Bears may need to go on high alert.
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Analysis by TheLondonForexBlog.com
Is the US consumer so embattled with day-to-day living pressures that this amount will be accepted as a price to pay to go about their daily routine?
The US consumer has shrugged their shoulders at the grocery check-out as weekly food shopping goes though $200 for the average family, sighed in despair as the Energy bill increased by 18% year-over-year, accepted meekly an increase in most household bills this year, and put their head in their hands over increasing mortgage payments from Adjustable Rate Mortgages that have just increased the average monthly payment by close to $200.
There is not a lot wrong with an economy that is able to ignore these inflationary pressures, and goes on to show expansion in the Manufacture and Service industries. It is a sign that the US consumer has accepted having to work harder to stay in the same position, and also shows that there is obviously enough economic expansion within the economy to possibly contain those fears. After all, Europeans pay close to $8 a gallon, so this is cheap in comparison, but how long before the consumer reacts in the US by tightening the purse strings? Something has to give, and at the moment it is not Oil prices, so will the US consumer step up and continue to pay increased prices? If they will then the economy has few things to be concerned about, outside of housing.
Higher Oil prices pressure the $, anything over $60 a barrel tends to impact the Greenback, and that has probably helped the $ weaken over the last few trading sessions.
The reasons that the US$ Index has been pushed to all-time lows may not be just from Oil prices and the housing market, moreover it is likely due in part to Global Business Cycles. The Major currency Pairs have economies that are in a Peak of their economic Business Cycles, at the same time that the US is coming out of a trough. That allows the $ to lose value quicker than it would if the US Business Cycle was also at a peak.
The UK, Euro Zone, Switzerland, Australia and New Zealand are all at the top of their economic cycles, they have all increased interest rates to stem inflationary growth, and they may be starting to see the impact of those increases in a slow-down during this summer. The fact that the US has already been through that slow-down phase, and is looking at expansion, may strengthen the $ over the coming months, so long as the Fed can contain the housing sector damage.
A weak $ is not a reflection of a weak economy, outside of the housing sector there are inflationary pressures in energy costs and wage demands that have the Fed's attention. The moment that a housing report prints positive the $ Bears may need to go on high alert.
__________________
Analysis by TheLondonForexBlog.com
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