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Fannie Mae, Freddie Mac Concerns Weigh On US Dollar

The leader of the currency trading portion of the contest, Edward Burke, continues to dominate, as he has made over $200,000 to bring his portfolio to $407,502.44 as of Thursday’s close. Burke’s gains have outpaced the other contestants by a large degree, as his portfolio balance is more than $100,000 higher than the second runner up. Furthermore, his currency profits have allowed him to advance in the ranks of the overall contest, as his stock and currency portfolio has the third largest balance (as of Thursday’s close) at $2,185,277.48. However, there’s one week left in the contest, giving the other contestants time to either rack up massive profits in order to catch up.

Meanwhile, Carlos Godfrey has been working on trying to hold his own in the top 3, and managed to do so on Thursday. Not only did Godfrey have the portfolio with the second largest balance of $292,104.16, but he also had the third largest balance of $289,424.47 as well. Last night, his portfolios were floating $5,000 - 7,000 in profits on the back of a short GBP/USD position, which he entered just above 1.98. However, the trade has gone against him in a big way this morning, as the US dollar has plummeted across the majors and sent GBP/USD rocketing above 1.99 despite broadly bullish US data.

Indeed, the US trade deficit unexpectedly narrowed to $59.8B from $60.5B while import prices rose 2.6 percent during the month of June and rocketed 20.5 percent higher from a year earlier, marking the sharpest gain since record-keeping began in 1983. The news will only add to the Federal Reserve’s inflation concerns, and a breakdown of the report shows, unsurprisingly, that petroleum was responsible for the majority of the increase as the component jumped 7.4 percent during the month and a whopping 78.6 percent from a year earlier. However, concerns about the solvency of Fannie Mae and Freddie Mac, both of which are government-sponsored, stockholder-owned companies, has weighed heavily on US equities, the Japanese yen crosses, and more specifically, USD/JPY. Given the extent of US dollar weakness this morning, Godfrey may not remain in the top 3 as of Friday’s close.

Terri Belkas, Currency Analyst for DailyFX.com