Daily Economic Commentary: United States

[PipDiddy]

What a wild and funky April Fools' Day it was for the Greenback last Friday! The better-than-expected results of the non-farm payrolls proved to be positive for the Greenback, but dovish words from FOMC Vice Chairman William Dudley caused the Greenback to totally reverse its move.

EUR/USD, for example, fell as low as 1.4063 and then skyrocketed to a new weekly high at 1.4245!

According to Dudley, the Fed shouldn't be overly optimistic about growth prospects as the economy is still in the recovery stage. He added that while the economy has indeed strengthened, the Fed is still far away from achieving its mission of maximum sustainable employment and price stability.

Dudely's dovish remarks overshadowed the non-farm payrolls that showed that 216,000 jobs were added in March, much higher than the 191,000 initially predicted. Meanwhile, the ISM manufacturing PMI came in as expected with a reading of 61.2.

In contrast to last week, this one will be pretty light in terms of economic data because the only high-profile economic reports that will coming out are the ISM non-manufacturing PMI and the FOMC meeting minutes. Both reports will be released on Tuesday, with the ISM non-manufacturing PMI at 2:00 pm GMT and the meeting minutes at 6:00 pm GMT.

[PipDiddy]

With the dollar’s price action as mixed as Happy Pip’s CD collection, it looks like the currency bulls and bears played a waiting game yesterday! No major economic reports were released from the U.S., but the dollar gained 12 pips on the euro and lost a few pips to its other counterparts. USD/JPY stepped 16 pips back to 84.03 while GBP/USD inched up by 14 pips to 1.6126.

Maybe markets are just waiting to see how hawkish the Fed members are in their speeches. As Forex Gump told me over our online chess game, the RBA, BOJ, BOE, and ECB are going to announce their interest rate decisions this week. In contrast to some of these central banks though, investors aren’t really expecting the Fed to give up their easy monetary policy anytime soon. Heck, Fed President Ben Bernanke didn’t even sound like he was expecting too much inflationary pressures! In his speech yesterday he stressed that while the Fed is willing to respond if needed; it sees high inflation as temporary.

While we wait for other central banks to give announce their interest rate decisions, we can watch out for the ISM non-manufacturing PMI report coming out at 2:00 pm GMT, followed by FOMC member Charles Plosser’s speech at 3:15 pm GMT. Since Plosser is a known FOMC hawk we might see the dollar gain support during his speech.

Last to come out for the day is the big FOMC meeting minutes out at 6:00 pm GMT. If the minutes turns out to be more hawkish than Bernanke was in his speech yesterday, then we just might see the dollar bulls charge!

[PipDiddy]

“I’ll have one of everything!” said the dollar as it chalked up mixed results across the boards. Maybe it’s because the U.S. economy also received mixed feedback yesterday from non-manufacturing data and the FOMC minutes. The dollar ended practically unchanged against the euro, while posting a big win against the yen and a big loss against the pound.

The ISM non-manufacturing PMI ticked down from 59.7 to 57.3 last month, which is basically the opposite of what economists forecasted. They had the index rising to 59.8 because of accelerating job growth, but rising oil prices had other things in mind.

Because of higher fuel costs, non-manufacturing companies are seeing ominous clouds ahead. They feel that rising gas prices will kill future sales, which is why they’re feeling down in the dumps.

On the other hand, the Fed doesn’t seem as pessimistic as it did a few months back. The FOMC meeting minutes yesterday revealed that the central bank is starting to feel more optimistic about the outlook for its economy. However, its members still seem to be divided about whether it should tighten monetary policy within the year.

Some argue that the recovery and inflationary risks call for a rate hike, while others believe it’s too early to pull the economy’s life support plug. Who’s right and who’s wrong? Well, we can' really tell. But the fact that some members are actually considering rate hikes again is a sign that things are starting to look up for the U.S. economy.

After yesterday’s heavy releases, we’re getting a break from U.S. reports today. So in the meantime, head on over to the U.K., euro zone, and Canada if you’re looking to trade the news. Good luck, pipsters!

[PipDiddy]

Having no U.S. economic data to direct its moves, it’s no wonder the dollar looked lost on the charts! It was able to salvage a victory against the yen, but it pretty much lost to all of the other major currencies. USD/JPY continued to forge new heights, climbing 61 pips to 85.44 while EUR/USD staged a rally of its own from 1.4221 to 1.4331.

Risk on, baby! Yesterday looked like a day at the casino from the way investors were taking risks. Equities, commodities, currencies—they all rallied strongly across the boards, fueled by the markets’ heavy risk appetite.

Sadly, no one had their bets on the dollar as traders felt confident enough to diversify away from the traditional safe-haven asset.

Again, no ground-shaking reports from the U.S. due today, but y’all should savor the silence ‘cause this doesn’t happen often! This gives us time to focus on the other countries’ big events. On tap today, we have a trifecta of rate statements from the euro zone, Japan, and the U.K.! Expect big, BIG waves on the charts of the major pairs when these reports come out!

[PipDiddy]

With the spotlight away from the U.S. yesterday, the Greenback capped the day with mixed results against its major counterparts. It lost a few pips to its fellow low-yielding buddies with USD/JPY falling by 51 pips to 84.93, but gained on the high-yielding ones as is shown by EUR/USD’s 28-pip slip to 1.4303.

Aha! I see a pattern here! Just when we thought that hawkish news would continue to push high-yielding currencies up the charts, we saw them plunge when word got around that another earthquake hit Japan. As the third largest economy in the world, any serious damage to Japan might take its toll on the economies of its trading partners. There was no damage done though, so the selling subsided a bit towards the end of the day.

For more good news, the U.S. jobless claims report released yesterday showed that workers filing for unemployment insurance fell by another 10,000 to 382,000 from its 392,000 number last week. I guess the positive NFP number is more credible now, huh?

No major economic report will hit the U.S. stages today, but make sure you stick around for any surprises!

[PipDiddy]

The dollar’s demise reminds me of my first love… or rather, the way I got dumped! Once again, the dollar found itself eating ice cream and crying itself to sleep, as it got rejected in the forex market last Friday. EUR/USD rose 150 pips to close at 1.4456, its highest level in a year.

One major reason why the dollar has been on a solid down trend lately is the continued speculation that the Fed will not follow the lead of other central banks and will not be raising interest rates any time soon. Low rates makes the dollar less attractive, which is why investors have been putting their funds in other higher yielding currencies.

The only good news that came out on Friday was that our beloved Republicans and Democrats put their differences aside and the U.S. government was able to avoid a lockout. Boo yeah baby! This alleviated some off tension off the dollar, but I suspect that this could be an issue that may resurface sometime later down the road.

No hardcore data on deck today, but watch out as a couple of FOMC members will be speaking today. Dudley, Evans, and Yellen are all scheduled to speak today. Considering how some members have been hawkish in their comments over the past couple of weeks, it'll be interesting to see whether any of these three drop hints about what direction the Fed will take on interest rates. Any mention that the Fed should raise rates sooner rather than later might just give the dollar the boost it needs to recuperate some of its losses.

[PipDiddy]

With no hardcore data coming out, risk hungry investors took a break allowing the dollar to edge slightly higher versus its major counterparts. EUR/USD closed 26 pips to finish at 1.4428, while GBP/USD fell 29 pips to end at 1.6348.

The reason why the dollar gained yesterday is most likely due to some profit taking that took place. After all, higher yielding currencies had been straight up killin’ the past couple of weeks, so a break every now and then is expected.

For now, the dollar is still stuck in the loser’s corner, as it seems that some Fed officials are quite dovish on the state of the economy. FOMC Vice Chairwoman Yellen talked about commodity prices and said that the recent surge was not reason enough for the Fed to start raising rates. She pointed to high unemployment as a reason why the Fed should not be a in rush to exit quantitative easing measures.

Meanwhile, Fed Governor (and also FOMC voting member) Dudley also laid down the dovish smack down, saying that people shouldn’t get too excited about tightening measures and not to overreact to inflation.

Later today, we get our first red flag of the week in the form of trade balance data. It’ll be interesting to see how the recent weakness of the dollar and the rise of commodities have affected the U.S. economy. According to forecasts, the U.S. posted a trade deficit of 44 billion USD this past February. I wonder though – could the past winter’s harsh conditions have affected trade? Tune in at 12:30 pm GMT to find out!

[PipDiddy]

The Greenback's performance was as mixed as a bag of nuts as it ended higher against the Loonie, Aussie, and pound but was outpaced by the rest of the major currencies. Will the upcoming U.S. retail sales report set a clearer direction for the Greenback?

Yesterday, the U.S. trade balance report turned out to be a disappointment as it fell short of the expected 44.1 billion USD deficit. The actual figure showed a 45.8 billion USD deficit for February, a tad better than the 47.0 billion USD deficit in January.

Up ahead, we have the U.S. retail sales report due 1:30 pm GMT. The report could show that retail sales are up by 1.0% while core retail sales increased by another 0.7% in March. If you're planning on playing this report, I suggest you read up on my buddy Forex Gump's take on trading the U.S. retail sales. Good luck!

[PipDiddy]

It was a mixed day for the dollar, which advanced against the euro but failed to do so versus the pound. EUR/USD dropped 33 pips to close at 1.4444, while GBP/USD stayed within a tight range of less than 70 pips and ultimately closed at 1.6267, up 14 pips on the day.

The retail sales report had some encouraging results, as headline and core sales rose by 0.4% and 0.8% respectively. This marked the 9th consecutive month that retail sales showed growth. Meanwhile, business inventories also picked up by 0.5%, indicating that the retailers are responding to the recent uptick in job growth by stockpiling inventory. Boo yeah!

However, while this figures were encouraging, the markets are still hesitant to take the dollar higher. Why?

It’s all about interest rates baby! The markets still don’t think that the Fed will be raising rates or withdrawing stimulus measures any time soon. As long as the Fed lags behind other central banks in terms of tightening, the dollar may struggle to gather any buying momentum.

Looking at today’s calendar, we’ve got a couple of second tier reports on deck in the form of the PPI and weekly unemployment claims reports.

Producers input prices are expected to have risen by just 1.0% over the past month, down from the 1.6% figure we saw in February. This may temper inflationary concerns, which would give the Fed even less reason to raise rates. Meanwhile, jobless claims are projected to be at 380,000, pretty much in line with the number we saw last.

Tune in at 12:30 pm GMT to find out the results of these reports!

[PipDiddy]

Just when you thought the Greenback has brought sexy back, dovish comments and worse-than-expected data come up and turn off traders. It lost to almost all of its major counterparts, giving up 50 pips to the euro and 80 pips to the pound.

Three FOMC voting members, namely: Fed President of Minneapolis Narayana Kocherlakota, Fed President of Philadelphia Charles Plosser, and Federal Reserve Governor Daniel Tarullo, talked about how the recent signs of inflation shouldn’t be a worry. Consequently, their remarks fueled speculations that we won’t hear the Fed holler an interest rate hike anytime soon.

Although all of them agreed that the earthquake in Japan and sovereign debt crisis in Europe have very little impact on the economy, none of them showed swag for the U.S. economy. Boo!

Adding more insult to the dollar’s injury were the reports in yesterday’s roster, all of which supported the not-so-giddy comments of the three FOMC members.

The headline figure for the March PPI report showed that prices of finished goods and services sold by producers increased at a slower pace of 0.7% than the rate that the market was eyeing at 1.1%. Meanwhile, the core figure overshot the consensus by 0.1% and reflected a 0.3% uptick in prices, excluding food and energy.

It was also reported that the number of people who filed for unemployment benefits last week was at 412,000. Not only did it come higher than the 379,000 forecast, but it’s also the first reading over 400,000 we’ve seen in five weeks!

A few market junkies are worried that this could be the start of the trend reversal in jobless claims. But let’s not jump into conclusions just yet. After all, it’s only a week’s worth of data.

Today we have quite a handful of reports on tap that may just cause some wild moves on the dollar. So make sure you don’t snooze on ‘em!

We start at 12:30 pm GMT with the CPI report for March. Both headline and core readings are expected to match their readings for February at 0.5% and 0.2% respectively. Along with that will be the Empire State Manufacturing Index for February which is seen to print at 17.1.

The TIC Long-Term Purchases report will also be released at 1:00 pm GMT. It is anticipated to show that long-term securities purchased by foreigners outpaced those bought by U.S. citizens in February by 59.4 billion USD.

A few minutes after, at 1:15 pm GMT, the industrial production report for March is eyed to post a 0.5% uptick after coming in flat in February.

We’ll then end the day with the University of Michigan’s preliminary report on consumer sentiment at 2:00 pm GMT. Consumer confidence is seen to have improved in March with the index predicted at 68.7 following its 67.5 reading in February.