Dollar getting a boost from lower energy prices after the July 4th US Holiday week in spite of continued weakness in US economic data. Crude prices were down over $5 a barrel to the $135 range on diminished concerns of conflict between Israel and Iran, and diminshed fears of a US landfall of Hurricane Bertha. U.S. pending home sales resumed their decline in May, falling 4.7% in the month after an upwardly revised 7.1% bounce in April, according to the National Association of Realtors. April's rebound was originally reported as a 6.3% gain, an unexpected bounce that followed an all-time low in the index in March.
Federal Reserve Chairman Ben Bernanke said the Federal Reserve may extend Wall Street's access to lending until 2009. Speaking at the FDIC's forum on mortgage lending in Arlington, Virginia, Bernanke did not speak on economic outlook or monetary policy, but he did say Congress may have to heighten its oversight of investment banks. He also said he endorses a proposal for a dealer liquidation process. The Fed Chairman said the financial turmoil that has rocked markets since August underscores the need to find ways to make the financial system more "resilient and stable."
Overseas, the G8 Summit in Hokkaido, Japan concluded, with world leaders agreeing on the need to stabilize the global financial system and on the fact that the global economy is slowing as a result of inflation from rising commodity prices. G8 officials also expressed concerns over the high price of oil and food, urging increased refinery capacity and crude oil production. Speaking from Hokkaido, Japan, French President Nicolas Sarkozy said that both American and European officials have expressed concerns over the weak U.S. dollar and the high value of the euro. The French president added that all would agree the gap between the Fed's and European Central Bank's interest rates is too high and that "monetary imbalances are disturbing the global economy."
Looking ahead to the second half of 2008 and into 2009 it is likely that the global economies of the world's largest countries in Europe and Asia are entering similar economic phases as experienced in the US starting almost one year ago starting with the mortgage crisis. According to many analysts interviewed by ForexTV.com the EU is likely to experience difficult times ahead. While it seems that world economic leaders have been idly talking about the need for a stronger dollar, the fact remains that unless dollar gets stronger, the world economy will remain under pressure. Not to diminish the impact of inflation, look for leaders to enact policies that will lead to a stronger dollar...or try to. More likely, the forces of global economics will lead to a strengthening dollar over the next six months.
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