The U.S. dollar is confirming short term strengthThe U.S. dollar is confirming short term strength

After a dull first quarter, the economy in the United States might again move up in the second half of the year. The U.S. dollar, in the meantime, has moved below important technical levels against the Euro currency, thus confirming short term strength.

In the United States rates should remain on hold for sometime

Following the manufacturing Institute for Supply Management (ISM) index, which increased slightly in May to 55.00 from 54.7 the prior month, the non-manufacturing ISM index rose to its highest level in 13 months. The move to 59.7 from April’s 56.00 was much stronger than market forecast expecting a small decline to 55.8 and it testifies that the economy is improving after a weaker first quarter. A reading above 50.00 indicates an expansionary economic environment. In effect, productivity in the Unites States has drifted lower, moving at a 1% pace in the first three months of 2007, compared to 2.1% in the fourth quarter of 2006. Numbers are below the previously estimated (1.7%) to show a milder growth, but could again expand in the coming months. Non-manufacturing ISM gains were in fact broad based and evenly distributed to most of the index components. As an example, in May, the employment index increased for the second straight month to 54.9 from April’s 51.9. The new orders index rose to 57.4 from 55.5 and the new export orders index climbed by an additional 10.5 points, after jumping 7 points in April. Finally, the prices paid components moved to highest level since August 2006.


Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.