Wednesday, April 18, 2007

Which end of the telescope?

The US economy is either growing well or not, depending on if you are a broker looking at stocks or a trader looking at currencies.

Karen Talley Of DOW JONES NEWSWIRES reports,
The Dow Jones Industrial Average traded above its closing record for a time on Tuesday, abetted by Coca-Cola and Johnson & Johnson and on optimism about upcoming earnings from International Business Machines and Intel.

"Investors were pleased with the latest round of economic news and "the first-quarter results and outlooks we're beginning to see are pretty healthy so far," said Georges Yared, chief investment officer of Yared Investment Research. "This is making investors feel confident about continued growth."
Meanwhile, Gertrude Chavez-Dreyfuss reports for Reuters,
The dollar dropped to a two-year low against the euro on Tuesday after data showed U.S. core consumer prices rose less than expected in March, bolstering expectations the Federal Reserve may be more inclined to cut interest rates this year.

The dollar also fell against the yen and sterling, which rose above $2 for the first time in almost 15 years as UK inflation data cemented expectations the Bank of England will raise rates next month.

Tuesday's economic releases renewed worries among investors the U.S. economy may be slowing, compared with solid growth in other regions such as Europe and Asia, analysts said.

"The negative dollar sentiment right now is related to the U.S. economy's potential for further slowdown and therefore rate cuts from the Fed," said David Powell, senior currency strategist, at IDEAglobal in New York.

"We do expect the U.S. to return to trend growth toward the end of the year. But in the meantime, we could be in for a period of sustained dollar weakness and we expect that to be most pronounced against the euro and sterling in the coming days and weeks," he added.

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