BATTER UP! Will the batter decide to take the first pitch? Or will he swing away? Traders stepped up to the plate last week to wait on the pitch Alan Greenspan was going to hurl at them in the way of his Congressional testimony on the economy…but Traders got a knuckleball.

The big surprise was in the form of an announcement by China’s Central Bank that they are going to let their currency, the Yuan, float against a basket of various foreign currencies rather than be fixed to the US Dollar…and this is a perfect example of how events around the world impact home loan rates right here in our own backyard. On the announcement, Bond prices took a nosedive on the concern that the Chinese will be now purchasing fewer US Bonds, as they will now have a reduced need to participate in currency intervention for the US Dollar. Bonds immediately came under heavy selling pressure as a result, causing home loan rates to rise by about .125% across the board.

There were also reports of more bombing and terrorist threats in London, along with a suicide bombing suspect being shot by police on Friday…and this had the already jittery markets rattled even further, as Traders tried to absorb all the news.

On the other hand, Chairman Greenspan offered no surprises in his testimony, and his comments were largely overshadowed by the other events of the week. He indicated that the Fed will keep pushing short-term rates higher, and had mostly positive comments about the US economy. However, he cautioned that a big run-up in already high energy prices – especially oil – could throw a wrench into US economic growth.

AND SPEAKING OF HIGH OIL PRICES…WHAT’S IN YOUR GAS TANK? ARE YOU ABSOLUTELY POSITIVE THAT YOU NEED TO BE SPENDING THE EXTRA MONEY FOR PREMIUM GAS WHEN YOU FILL UP? DON’T MISS THIS WEEK’S INTRIGUING MORTGAGE MARKET VIEW, AND FIND OUT IF YOU CAN KEEP SOME EXTRA CASH WHERE IT BELONGS…IN YOUR WALLET.

BOO! Ever had someone jump out from behind a corner and scare you? A normal reaction would be to jump or scream…but if you had known that the person was there, your reaction would of course have been far less dramatic. The surprise announcement by the Chinese had a similar impact on the market. There had been speculation that China would announce a change in their currency policy sometime in August, but no one saw the change coming quite so soon. This means that the market reaction, a sharp worsening of Bonds and home loan rates, was likely exaggerated purely because of the surprise factor. The market began to settle out on Friday afternoon, but what might happen next?

This week brings a full slate of economic reports for Traders to watch, as well as a good look at the housing market with New and Existing Home Sales. Mortgage Bonds and home loan rates have been worsening of late, and now stand at a critical point. There are many different technical support and resistance levels, which act as natural floors and ceilings that can sometimes limit price movement. When Bonds took their big slide in the wake of the Chinese announcement, they stopped dead on a floor of support…and then recovered on Friday right up to a ceiling of resistance.

So the battle begins – this week’s news will determine if Bonds will be able to muscle back above this ceiling and help home loan rates improve, or if they will be pushed back lower to the floor of support or lower…and cause home loan rates to worsen.

In a world where bigger, faster, and more expensive is typically seen as a gauge for getting what’s best, the same may not be true in what you need to make your car run better. Many people believe you need premium fuel to get that extra juice when pulling away from the stop light or to just plain make your car run better. But this is not always the case.

It used to be that if a car called for premium gas and you pumped in regular, your car would knock and ping and even vibrate. Pinging or knocking is what you get when you have gasoline burning uncontrollably in your engine. If you have ever turned off your car but it continued to sputter and run, this is an example of knocking. But that was before they essentially put a laptop under the hood, as has been done for about the last fifteen years of manufacturing. Now, sensors take readings and can tune the engine as you drive, adjusting the timing for whatever grade fuel you put in the tank.

When choosing what grade of gasoline to use, read the owner's manual carefully. The key is to figure out whether premium gasoline is "required" or "recommended." If it is only recommended, then you could easily opt for a lower grade of gas and save some cash. And most cars manufactured today are actually made to run on regular gasoline. The exception tends to run in some performance and luxury cars where they are designed to run on premium gas alone. However, many cars that are designed to run on premium have sensors that will still let you run them on regular with no harm done, albeit with slightly less power.

In most cases you can run your vehicle on regular gas. But if you just feel better running premium in your tank or you truly can see a difference in the performance, don’t get too worked up. The bottom line is you’ll dish out about $20 a month more for premium if you average 15K miles a year and get 13 MPG. On the other hand, if you have a car that sips its juice sparingly and averages 25 MPG, the difference at the pump falls to about $10 a month more for premium.

With rising fuel costs, it may be helpful to know fuel efficiency rankings and estimates. For more information, check out Most and Least Fuel Efficient Cars.

The markets will contend with a full slate of economic news this week that is expected to show an improving economy, as well as a good look at the housing market with Existing and New Home Sales on Monday and Wednesday.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

For the week of July 25 – July 29