Daily Economic Commentary: United States

[PipDiddy]

In the absence of US economic reports, the greenback's performance was "Hot 'N Cold" yesterday as it weakened against the pound and yen but strengthened against the euro. Could it be that traders are still unsure where to take the greenback as they await the Fed Chairman's testimony this week?

After the Fed raised the discount rate last week, Fed officials have been reiterating that the 25 basis point hike shouldn't be interpreted as a tightening move from the central bank. Yesterday, Fed official Janet Yellen emphasized that it was not yet the right time to remove monetary stimulus. Although she mentioned that an economic recovery is underway, she warned that the strict credit conditions could hamper growth. Ben Bernanke's speech on Wednesday could adopt the same cautious tone.

But before that, let's take a look at the economic reports on today's agenda! The S&P housing price index, which is due 2:00 pm GMT today, could show that house prices fell by 3% year-over-year in December. This would be a smaller decline than the annualized 5.3% drop seen in November.

Also due today is the CB consumer confidence index, which could slide from 55.9 to 55.0 in February. If the actual figure due for release at 3:00 pm GMT shows a deterioration in consumer confidence, greenback buying could come to a screeching halt.

[PipDiddy]

It was a crazy day for the dollar bulls yesterday! The USD staged a broad-based push against most of the other majors. Wow. Combined dismal economic reports from the UK, euro zone, and the US led to a massive dollar buying.

Selling pressure continued to hound the higher yielding assets during the US session when the February CB consumer confidence index unexpectedly fell to 46.0 from 56.5 as the view for jobs in the US start to become a little hazy. A weak outlook in the job market indicates that consumer spending could be frail as well. The latest figure is its lowest reading in 10 months.

Equities and higher yielding immediately sunk while the USD and yen soared following the report.

At 3:00 pm GMT today, Fed Chairman Ben Bernanke will testify on the semi-annual monetary policy report before the House Financial Services Committee. In his speech, he’ll discuss if more stimulus is needed to promote more jobs in the US especially now that the outlook for it is starting to turn sour again. Obviously, any hawkish statement could lead to another dollar buying.

The US’s new home sales figure in January will also be due at 3:00 pm GMT today. Sales are seen to be at 354,000 on top of the 342,000 score in the month prior. An upbeat number here could possibly temper the dollar’s recent ascent.

[PipDiddy]

Wednesday started off with the dollar moving lower as a result of some profit taking from its stellar rally from the day before. Once US economic data was released, however, risk aversion set in, helping the dollar erase its losses and end the US session hardly changed against most major currencies.

The new home sales report, which was expected to print that an annualized number of 354,000 homes were sold in January, only came out with a reading of 309,000. The unexpected fall in the new home sales spurred a case of risk aversion amongst traders, which, needless to say, pushed the dollar and the yen higher versus all the other currencies.

During the same time, however, Federal Reserve Chairman Ben Bernanke reiterated the bank's commitment to keep rates steady for an “extended period,” which capped the dollar's gain yesterday. I think Forex Gump's right on this one, the prospect of speculation of a rate hike earlier than expected is too far-fetched, especially with the country's ugly labor market situation and poor consumer confidence.

Expect another wacky day today as a bunch of high-profile events from the US are scheduled.

At 1:30 pm GMT, the durable goods orders and the unemployment claims are due.

The durable goods orders report for January is expected to show an increase of 1.6%, higher than December's revised up 1.0% gain. However, the core version of the report, which excludes the sales of transportation items such as airplanes and cars, is predicted to show a growth of 1.1%, down the 1.4% increase from the month before. Items are considered durable goods if they do not easily wear out, and have a lifespan that exceeds three years.

Meanwhile, the unemployment claims report is predicted to show that 461,000 people claimed for jobless insurance for time for the week that ends in Feb. 20.

Shortly after, at 2:00 pm GMT, Fed head Ben Bernanke will be speaking again. This time, he'll be talking before the Senate Banking, Housing and Urban Affairs Committee. Just like yesterday, he'll be reporting on the status of the bank's monetary policy.

So there we go forex friends... A couple of high-impact economic events today that could help the dollar bust out of its trading range... Stay safe!

[PipDiddy]

Poor data early on in the US session sparked a mini run of risk aversion, as durable goods orders and unemployment claims came in worse than expected.

Reports showed that durable goods rose by 3.0% in January after it was expected that orders would rise by just 1.6%. You may be asking, “I thought that durable goods came in better than expected? Isn’t this good news?” Well, yes, the headline data did but remember, all the hotshot experts and analysts focus on the core durable goods figures because it doesn’t include transportation goods (whose prices are volatile), so we should focus in on core data as well! The report indicated that core orders fell by 0.6%, after it was predicted to have risen by 1.1%! This indicates that consumer demand is weakening.

The labor situation isn’t getting better either, as unemployment claims came in much higher than forecasted. Claims for last week were at 496,000 continuing a disappointing trend of not living up to expectations. It’s no wonder consumer confidence is dropping!

US Fed governor Ben Bernanke delivered a speech once again yesterday, but his comments didn’t really cause too much of a market reaction as he basically repeated what he said the day before. He did talk a little about Goldman Sachs and their role in deals with Greece’s derivatives. I’m looking forward to see how this develops as the everyone is keeping an eye out for news from Greece right now.

We’ve got a slew of data coming out today that could make this wild week even wilder. At 2:45 pm GMT, the Chicago PMI report will be released. It is expected to print a reading of 59.6, down from a reading of 61.5 the previous month. The index measures business sentiment according to survey results from business managers. With a reading above 50, this would indicate that expect business conditions are picking up.

Later on at 2:55 pm GMT the revised University of Michigan consumer sentiment report is on deck. Forecasts are for a score of 74.0, a slight uptick from last month’s level of 73.7. Given how the consumer sentiment report earlier this week revealed that sentiment has dropped like a brick, could we see worse than expected figures from the UoM report?

Also due today are existing home sales data at 3:00 pm GMT. The annualized rate of existing homes that were sold is seen to rise from 5.45 million in December to 5.51 million last month. It’ll be interesting to see what figure comes out. Remember, earlier this week, new home sales figures were much worse than expected...

Before I forget, Fed lone wolf Thomas Hoenig will be delivering a speech to kick off the festivities at 1:30 pm GMT. In case you forgot who Hoenig is, he’s the Fed member who said a few weeks back that the Fed needed to hike rates sooner rather than later. Well, he got part of his wish as the discount rate was raised last week. Let’s see if contradicts other Fed members and says that other interest rates should be hiked up as well.

Okay that’s it for today... Ha! You thought I forgot about the GDP report due later?! Course not! It’s coming out at 1:30 pm GMT. I just read Forex Gump’s recent post, and I’ve also got a hunch that we may see GDP figures come out worse than expected...

[PipDiddy]

Not so fast! After almost an entire week's worth of safe-haven rallies, risk appetite came back in stride last Friday. With this week's economic schedule filled to the brim with high impact reports, was last Friday's move merely a pullback or would the greenback continue to lose?

First, a quick glance back at the economic events from the end of the previous week: Except for the existing home sales report that came in below consensus, Friday's set of economic figures were on the upbeat end. The preliminary GDP report enjoyed an upward revision from 5.7% to 5.9%, indicating that economic growth was stronger than previously estimated. Aside from that, the Chicago PMI exceeded expectations and surged from 61.5 to 62.6 in February. Looks like the US economy is in pretty good shape...

Because of that, Fed official Charles Evans decided that it was about time to give a time frame for the central bank's pending rate hikes. Well, this should be big news, considering how Fed officials have been sticking to the "interest rates will remain low for an extended period of time" script for quite a while now! Evans predicted that the Fed would likely be ready to raise rates after three to four FOMC meetings. That means the first Fed rate hike could take place in June so I'd definitely be on the lookout for that.

Instead of turning bullish on the greenback based on strong economic data and the prospect of an upcoming rate hike, traders became a bit more confident as they gunned for riskier and higher-yielding assets. Does this mean that risk sentiment would be the driving force of the markets for this week?

The first dose of economic reports this Monday could determine whether risk tolerance is here to stay. Consumer sector data, namely the personal spending and personal income reports, are due 1:30 pm GMT. Both reports are expected to print larger upticks relative to those posted in December. Later on, at 3:00 pm GMT, the ISM manufacturing PMI will be released. This index is expected to dip from 58.4 to 57.7 in February. Note that this indicator has been steadily climbing since November and a weaker than expected figure could bring back risk aversion.

On Tuesday, the greenback could pause to catch its breath as the US economic schedule is free from top-tier reports. Only the total vehicle sales, which is expected to reach 10.6 million in February, is due then.

Wednesday has the ADP non-farm employment report on tap. Most traders are probably keeping a close eye on this report, knowing how it usually serves as a preview of the upcoming non-farm payrolls report. Based on the ADP report, only 13K in net job losses are expected for January, a lower figure than the 22K increase in employment seen in December. Also due on Wednesday are the ISM non-manufacturing PMI and the Fed's Beige Book.

Aside from the usual weekly jobless claims due Thursday, also set for release are the pending home sales and factory orders reports. Both are slated to post 1.4% growth for December, following a 1.0% increase in November.

And on Friday... drum roll, please... the NFP report! After failing to print a positive reading last time, the NFP report could show a much larger increase in employment for January. A total of 40K in net job losses are expected to follow December's 20K reading. This could bring the unemployment rate from 9.7% up to 9.8% for the month. Uhoh, it seems like the economic recovery wasn't as smooth-sailing as many hoped. Weaker than expected figures would most likely keep risk-taking in check this week.

[PipDiddy]

Despite the strength of the US capitals market, the USD started the month of March on a bright note. At the end of the day, the USD closed the session mixed versus the other major currencies.

Personal income and personal spending in January also came mixed with personal spending coming in at 0.5% which is better than the 0.4% consensus. Personal income, however, fell to 0.1% from 0.3%.

On separate reports, both the core PCE’s and ISM manufacturing PMI’s results were met with pessimism which led to a dollar rally. The core PCE price index in January came in flat at 0.0% while the country’s manufacturing PMI also fell short at 56.5 which is below the market’s 57.7 consensus and last period’s 58.4 score.

No major economic reports are scheduled for release in the US today. Volatility in the USD, however, could be ignited by the upcoming GDP report in Switzerland, CPI release in the euro zone, and the interest rate decision in Canada. Watch out for these events!

[PipDiddy]

The dollar traded in a mixed fashion against other major currencies yesterday. The dollar entered the Asian session with a strong rally but failed to keep its momentum and lost all of its winnings once the US trading sessions started.

It seems that the culprit for the dollar's drop early during the US trading session was improved risk appetite supported by the rally of US stocks. No important data was released yesterday but we've got a bunch of high-profile reports on the economic cupboard today.

First up, at 1:15 pm GMT, is the ADP non-farm employment change report. The forecast is that 15,000 net jobs were lost in February, lower than the 22,000 jobs shed the month before. The report usually creates a significant market impact because traders tend to see it as a leading indicator of the upcoming non-farm payrolls on Friday.

Shortly after, at 2:00 pm GMT, the ISM non-manufacturing PMI for February is due. Similar to the manufacturing PMI released earlier this week, the index measures whether the non-manufacturing industry is growing or shrinking by using a boom/bust scale. A reading above base line 50.0 indicates that the industry is expanding while a reading below 50.0 means otherwise. The expectation is a reading of 51.0, slightly higher than January's reading of 50.0. If consensus holds, it would mark the fourth month in a row of gains.

Lastly, at 7:00 pm GMT, the Fed's Beige Book will be released. The Beige Book summarizes the economic conditions as seen by the Federal Reserve Banks in the US. This report allows outsiders (traders like you and me) to know what the Fed governors are looking at in preparation of their upcoming FOMC meeting.

[PipDiddy]

The dollar cried “Uncle” in yesterday’s trading session, as it got beaten up across the board on increased risk appetite and news coming out of the euro zone. For the 2nd day in a row, the EURUSD finished higher to close at 1.3696.

According to the Beige Book released yesterday, the US economy is showing signs of improvement. It seems that Fed took this as a positive sign, as 9 out of 12 regions improved despite the poor weather this past winter. Given these developments, could it be time for US head honcho Ben Bernanke to stop saying that they will keep rates low for an ‘extended period’? Or will Fed officials wait for improvements in all 12 regions before changing their stance?

In other news, risk appetite was boosted by the results of the ISM non-manufacturing PMI report. The index printed a score of 53.0, which beat consensus of a reading of 51.0. This indicates that non-manufacturing industries are showing expansion.

The ADP non-farm employment change report was also released yesterday, coming in slightly worse than expected. According to the ADP, job losses were at 20,000 last February, higher than the expected 15,000 figure. What’s important to note here is that January’s figure was revised down from 22,000 to 60,000! It seems that labor conditions are still unstable. Could this be a sign of things to come tomorrow when the NFP report is due?

Today, we’ve got another round of data coming out in the form of unemployment claims, pending home sales data and factory orders figures. Jobless claims are expected to have dropped from 496,000 the previous week to 472,000 last week. Meanwhile, pending home sales and factory orders for January are seen to have risen by 1.4%. Given the poor weather we saw this past winter, could we be in for a downside surprise? After all, Big Ben Bernanke recently pointed to poor weather conditions for the down tick in consumer spending last quarter...

[PipDiddy]

Dollar domination! Traders flocked to the safe-haven US dollar after economic reports from the US came in much weaker than expected. Does this set the stage for today's much-awaited event, the non-farm payrolls report?

First, let's review yesterday's set of economic reports. Labor productivity climbed by 6.9% in the fourth quarter, outpacing the consensus of a 6.2% increase. This higher than expected increase has negative implications for wage rates since a rise in productivity implies that corporations are doing well with their current set of employees. This means that they wouldn't need to hire more and that they wouldn't need to hike wages in order to spur more productivity. In fact, wages actually fell by 5.9% during the quarter, its biggest drop in more than five years. Lower wages could then constrain consumer spending, which would weigh down economic activity in the US.

Furthermore, pending home sales posted an unexpected decline of 7.6% instead of increasing by 1.4% in January. This implies that the extended tax credit is doing very little to spur home-buying.

Now, for the main event! Drumroll please... the non-farm payrolls report! This employment report is now expected to print 56K in job losses, downwardly revised from the previous estimate of 40K in job losses. Uh-oh, it seems like labor conditions aren't picking up in the US. Just like Forex Gump pointed out in his NFP preview, the increase in unemployment was likely a result of the poor weather conditions during February. Although a bleak figure could be reported at 1:30 pm GMT today, analysts are hopeful that jobs growth will eventually pick up during March.

An even weaker than expected figure could continue to push the US dollar higher by virtue of its safe-haven status. But if traders decide to focus on fundamentals and consider that weaknesses in the jobs market could eventually hamper US economic growth, massive US dollar selling could ensue. Either way, this report is bound to turn the heat up in today's trading session. Be careful out there!

[PipDiddy]

Risk appetite placed the USD back on camp last Friday. The dollar incurred a broad-based loss versus the high yielders following a smaller drop in US payrolls. The dollar only strengthened against its counterpart in the East, the Japanese Yen. The USDJPY jumped to 90.36 from 89.12.

The USD remained pretty much flat for the most part of last Friday’s trading up until the result of the US NFP employment change came out. Firms in the US surprisingly slashed only about 36,000 jobs which is much better than the 56,000 estimate. And as a result, the US’s jobless rate managed to remain at 9.7%.

No high impact economic reports are due in the US during the first two days of the week. But on Wednesday, the US government Federal budget balance will be on check. The country’s budget deficit is seen to balloon to -$199.5 billion from -42.6 billion. Such deficit in spending is of course going to be funded through debt which will further place some pressure on the USD.

The US’s trade balance and weekly initial jobless claims are due on the same day as well. The country’s trade deficit is seen to worsen slightly to -$40.8 billion in January from -40.2 billion. Unemployment claims for the week ending March 6, on the other hand, are seen to come in lower at 453,000 from the previous week’s 469,000 tally.

On Friday, the US’s February retail sales and March UoM confidence index will be reported. Retail sales likely slid by 0.1% after a 0.5% gain in the previous month. The UoM confidence index, though, is seen to have risen a little to 74.0 from 73.6