Daily Economic Commentary: United States

[PipDiddy]

Way to drop the ball! On its big day, the dollar was a big disappointment as it lost massive pips against its major counterparts in light of weaker-than-expected growth and the Jackson Hole symposium. While EUR/USD rallied 110 pips to close at 1.4496, USD/JPY tumbled to 76.69 after opening at 77.49.

The first event to deal a blow to the dollar was the release of soft GDP data. According to last quarter's stats, the economy grew just 1.0%, just a hair's width below the forecasted 1.1% growth. While the report did deal a bit of good news by revealing healthier corporate profits, wages, and salaries, it didn't paint such a pretty picture for consumer sentiment.

Apparently, our bros in America haven't been in the mood to spend, and this has taken its toll on consumer spending, which only grew at 0.4% last quarter, its slowest pace in over a year. That's definitely not what you want to hear from the economy's cash cow as consumer spending contributes around 70% of GDP.
This was so alarming that after seeing such figures, many economists were forced to cut their growth forecasts for the year.

But leave it to Big Ben Bernanke to look on the bright side of things. In his speech in the Jackson Hole symposium, the Fed top dog sounded surprisingly upbeat for the economy. Not only did he NOT signal more stimulus (QE3) as many had anticipated, but he even said his long-term outlook for the economy has become "more optimistic." Furthermore, he added that the recovery will remain moderate and will probably pick up in the second half of the year. He even said that the Fed will do "all that it can to help restore high rates of growth and employment."

Of course, right after hearing those words, the markets reacted by buying the dollar back as they unwound their QE3 bets. But as the day wore on, they eventually resold it. Now why did they do that??

One possible explanation is that it took time for the markets to realize that all that Big Ben did was delay the decision for further easing to September, when the Fed holds its next FOMC meeting. After all, Ben never really ruled out QE3, did he? Some describe his words as blind optimism, as Bernanke himself admitted that the Fed cannot guarantee long-term growth. That being the case, many believe the Fed is just buying more time to decide what to do.

Now, the question is, will this continue to drag down the dollar? Well, momentum certainly seems to be siding with dollar bears. But we must also take into consideration any upcoming reports if we want to avoid getting blindsided by news releases.

Today, we have pending home sales data due.. Forecasts call for a 0.8% decline after the previous month's 2.4% uptick. Interested in trading the news? Catch the release at 2:00 pm GMT.

Later in the week, we'll take a look at more critical U.S. data. We have the FOMC meeting minutes due tomorrow, and the ADP employment report on Wednesday. Thursday picks up with the ISM manufacturing PMI, and on Friday, we have the NFP report on tap. These reports, when taken together, will give us a much clearer picture of the state of the U.S. economy, and in the process, give us a better idea of where we can expect the dollar to go! Good luck, folks!

[PipDiddy]

Kaboom! With risk appetite picking up to start the week, the dollar found itself sinking against higher yielding currencies. EUR/USD finally broke above the 1.4500 handle, while AUD/USD rose nearly 80 pips to close at 1.0654.

Part of the reason why the dollar have suffered could be that traders may be starting to price in additional quantitative easing measures by the Fed. Take note, head honcho Ben Bernanke stayed coy about the prospects of more QE3 at last week’s Jackson Hole Symposium. Some believe though, that decision could be made as soon as the next Fed meeting in late September and may actually be establishing their positions as early as now.

In other news, we got some mixed data from the U.S yesterday.

First, the core PCE index, which is rumoured to be the Fed’s preferred gauge of inflation, came in as expected at 0.2%. Of course this doesn’t really mean much, as it just shows that inflation remains subdued in the U.S.

We got some good news in the form of the monthly personal spending report, which showed that consumer consumption rose by 0.8% last July, which beat the forecasted growth of 0.5%. This indicates that consumers are spending more, which bodes well for the economy recovery. The only problem is that it outpaced the growth in personal income, which came in at 0.3%.

Spending is fine and dandy, but not when you spend more money than you make! That’s what gets you in trouble! Hopefully this is just a one month aberration and income growth picks up in the coming months.

Lastly, pending home sales figures were disappointing, falling a worse-than-expected 1.3%, after projections were calling for a 0.8% decline. This marked the second consecutive month that home sales have dropped, and is indicative of a poor housing market.

For today, we’ve got some top tier data in the form of the CB consumer confidence index and the FOMC meeting minutes, which are coming out at 2:00 pm and 6:00 pm GMT respectively.

The consumer confidence index is projected to print at 52.1, which would mark a drastic drop off from last month’s release of 59.5. Then again, considering all that’s going on in the global economy, it shouldn’t be that surprising that everyday Joes are becoming less optimistic.

The one report I’m looking forward to though is the FOMC meeting minutes. Today’s release will be heavily anticipated as it will give a better glimpse as to the Fed’s stance regarding more QE. If it turns out that less FOMC members are in favour of more stimulus measures, it may just give the dollar the boost it needs to bounce back from its recent defeats!

[PipDiddy]

Dollar trading was as varied as the colors of the rainbow yesterday due to the mixed results of economic data released. While the dollar posted huge gains over the euro and the pound, it fell against the Aussie and the Kiwi. The U.S. dollar index ended the day at 74.36, 24 percentage points higher from the level it opened during the Asian trading session.

On the positive side of things, the S&P/CS Composite House Price Index came in with only a 4.5% decline, slightly better than the 4.7% decrease initially expected. It was also an improvement from the previous month’s 4.6% fall.

On the negative side, the CB Consumer Confidence survey failed to meet the forecast of 52.1 and printed a 44.5 reading only. The Federal Reserve’s meeting minutes also revealed that disagreement with regards to monetary policy has grown. Some members thought that additional easing was necessary while others believed that they should remain conservative.

It seems that the future will be cloudy for now as the Fed remains divided on how they should deal with the U.S.’s very slower-than-expected growth.

Today, there are three reports that you should watch out for. The first one is the ADP's version of the NFP. It will publish at 12:15 pm GMT later and is predicted to show that 102,000 net jobs were created. The second one, which is the Chicago PMI, will come out at 1:45 pm GMT. It is slated to print 54.3, lower than last month’s 58.8. Lastly is the Factory Orders report. It will come out at 2:00 pm GMT and is predicted to show a 1.8% rise, opposite the 0.8% from last month.

[PipDiddy]

The dollar danced to the tune of risk aversion yesterday as it gained against high-yielding currencies, but lost against its fellow safe havens on mixed economic data. EUR/USD sharply dropped by 88 pips to 1.4366, while USD/CHF plunged to an intraday low of .7995 before capping the day with a 141-pip loss at .8057.

Just when investors thought that risk appetite was creeping in – BAM! They were presented with mixed economic reports from the U.S. The Challenger job cuts report revealed less layoff plans in August, while the ADP report printed at 91,000 when analysts already pegged the figure near 50,000. These employment figures are still weak, of course, but they weren’t as bad as markets had predicted.

Chicago’s PMI data also gave currency bulls a bad moment, but only for a while because the 56.5 reading in August is actually better than the 54.3 index number that analysts were eyeing. Lastly, factory orders in July went up by 2.4%, which is not only better than June’s upwardly revised 0.4% growth, but is also better than the 0.8% growth forecast.

Will the dollar gain more ground against its high yielding counterparts today? At 12:30 pm GMT we’ll get hold of the initial jobless claims report, which will be followed by the ISM manufacturing PMI at 2:00 pm GMT. Both reports will be considered my most investors ahead of the big NFP report this Friday, so make sure you watch out for it too!

Also remember that aside from the U.S. economic reports, markets will also be watching for any signs of more QE from the FOMC members. Word around the hood is that Fed President Lockhart has been stirring up the airwaves with his comments, so stick around for more development on this, aight?

[PipDiddy]

Thanks to risk aversion rearing its ugly head back into the markets, the dollar was able to once again spook pips out of its European counterparts. EUR/USD ended the day 97 pips lower at 1.4269 while GBP/USD closed the day 49 pips below its opening price at 1.6184.

The Greenback was even able to bring snatch pips from the yen when USD/JPY closed at 76.80 after starting the day at 76.57. Impressive, huh?

As it turns out, Europe's sovereign woes continued to highlight the dollar's safe haven reputation. It might have also helped that yesterday's roster of economic reports didn't disappoint market expectations.

Last week's unemployment claims report showed that 409,000 people filed for jobless benefits which was what analysts had predicted. On top of that, September's ISM manufacturing PMI report came in at 50.6. The figure might have come as a pleasant surprise for dollar bulls as market junkies were bracing for a bigger pullback in overall manufacturing activity in the U.S. given the disappointing manufacturing reports we've seen in recent weeks.

I don't think we'll see a lot of dollar lovin' today though. Well, at least not until the much-awaited NFP report is released. The employment data for August will probably rock the markets more than the previous releases because the figure would most likely affect the Fed's stance on monetary policy. Word around the FX hood is that if the report tanks so bad, Big Ben and his buds may just pull the trigger on QE3 soon.

Due at 12:30 pm GMT, analysts have predicted the NFP report to show that a net total of 74,000 people joined the labor market in August. Meanwhile, the unemployment rate is seen to have remained steady at 9.1%.

Make sure you don't miss it later, ayt? If you're unsure how to trade this high-caliber report, head on to Forex Gump's most recent blog post as he cites the possible scenarios for the NFP release. Good luck and may the pips be with you!

[PipDiddy]

The dollar’s price action last Friday showed another classic case of risk aversion in markets as traders reacted to the surprisingly weaker-than-expected U.S. NFP report. While EUR/USD fell by 74 pips to 1.4196, USD/CHF also dropped to an intraday low of 227 pips below its open price. Yikes!

Looking at the much-anticipated NFP report, I can’t really blame traders from flocking to the low-yielding currencies. The Non-Farm Payroll report not only showed ZERO job growth in August, it also revealed that average earnings of existing workers actually declined by 0.1%. Meanwhile, the unemployment rate remained at 9.1%.

The disappointing figures sent a huge wave of risk aversion in markets as investors worried about global economic growth. After all, severe employment troubles in the world’s largest economy is a hard pill to swallow especially when the euro zone and the Japanese economy, the world’s third largest economy, are also facing strong headwinds.

For today traders will have more time to digest the weak report as it is a Labor Day bank holiday in the U.S. (ironic, isn’t it?) The action will start tomorrow at 2:00 pm GMT though, when the ISM services PMI is released, followed by the Beige book report on Wednesday at 6:00 pm GMT and the trade balance report on Thursday at 12:30 pm GMT.

Though the reports above aren’t as closely watched as the NFP report, they might still rock the markets if they print dramatically lower or higher than analyst expectations. Make sure you stay glued to the tube!

[PipDiddy]

Here we go, fellas! U.S. traders are now back from their Labor Day holiday and are ready for some action. The U.S. dollar didn't let the lack of trading volume stop it from making gains against its major counterparts yesterday, and we might just see the same behavior today. Let's take a look at the upcoming economic reports to find out.

There weren't any economic figures released from the U.S. yesterday but risk aversion from last week's NFP release continued to take its toll on the higher-yielding currencies. Today, the U.S. is set to release its ISM non-manufacturing PMI which is expected to have dipped from 52.7 to 51.2 in August. Bear in mind that traders are feeling extremely wary about taking on more risk these days, which means that a worse than expected figure could trigger more safe-haven buying. Keep an eye out for the release at 2:00 pm GMT.

[PipDiddy]

What can stop the Greenback’s rally right now? Nothing, it seems. On Monday, the Greenback rose due to increased risk aversion. Yesterday, the reason was a very positive ISM-non manufacturing survey. The U.S. dollar index, which tracks the performance of the Greenback versus other major currencies, won for the sixth straight day and closed the U.S. trading session at the 76.34 level.

The ISM non-manufacturing PMI showed unexpected strength when printed a reading of 53.3 reading, significantly higher than both the forecast (51.2) and the previous month’s figure (52.7). While it didn’t completely remove double-dip recession fears, it did show that economic recovery has not stopped and is definitely still improving.

The only bad news is that the employment section of the survey fell, reaffirming the weak job growth revealed in the most recently released non-farm payrolls.

Today, the U.S. economic calendar has nothing in store for us. This doesn’t mean that we’ll be seeing a quiet trading session though. There are a number of tier 1 reports from other major economies (BOJ and BOC interest rate decision, Ivey PMI, U.K.’s manufacturing production) that will produce a lot of volatility in the foreign exchange market!

[PipDiddy]

Ahh, all good things must come to an end. The Greenback's winning streak came to a close yesterday as risk appetite improved. The commodity currencies outpaced the U.S. dollar, which consolidated against the Swiss franc. USD/JPY closed at 77.28 while EUR/USD ended 4 pips above the 1.4100 handle.

Thanks to the German court's ruling on the bailouts, risk appetite improved considerably yesterday, encouraging traders to pursue higher-yielding assets. Aside from that, the contents of the Fed's Beige Book weren't as pessimistic as expected. The Beige Book revealed that seven out of the twelve Fed districts reported a slowdown in growth while the other five showed modest growth. Not too shabby, eh?

The good news is that consumer spending showed improvements in most districts while the Fed noted that the labor market is generally steady. Now that's not exactly what we witnessed when we saw the big fat zero on the August NFP report! But since the Beige Book is typically used as the basis for the Fed's upcoming monetary policy decisions, the central bank probably doesn't feel the need to implement QE3 yet.

Fed Chairman Ben Bernanke's speech at 5:30 pm GMT today could shed more light on the Fed's outlook. Keep your eyes and ears peeled for any dovish comments because these could hint at the prospect of QE3 and bring risk aversion back in the markets.

But before that, don't forget to keep tabs on the U.S. economic figures set for release today. The trade balance is due 12:30 pm GMT and could show that the deficit narrowed from 53.1 billion USD to 50.6 billion USD in July. A lower than expected deficit would imply that U.S. exports are doing much better, which would be positive for the U.S. economy and probably the dollar. Also due 12:30 pm GMT today is the weekly jobless claims report which could show that first-time claimants reached 407K in the previous week.

[PipDiddy]

The dollar FTW!!! Thanks to a serious case of risk aversion and Bernanke's dovish words, the dollar emerged as one of yesterday's strongest currencies. It strengthened against almost all its major counterparts, most notably against the euro. EUR/USD fell 114 pips from its opening price of 1.4104.

All eyes and ears were focused on what Fed Chairman Ben Bernanke had to say yesterday. Leave it to Big Ben to deliver! He gave the markets just what they were hoping for - plenty of action!

According to Ben, the Fed is ready to take on more stimulus in the near future, inflation notwithstanding. However, he stopped short of revealing what course of action the Fed is most likely to take. Whether it'll implement a full-blown QE3 or try out other options such as Operation Twist is yet to be determined.

All in all, this helped trigger a bout of risk aversion that saw U.S. stocks tumble and the dollar reprise its role as a safe-haven currency.

As for economic data, the U.S. got mixed results. It's trade balance revealed that its deficit shrank from 51.6 billion USD to 44.8 billion USD, instead of just 50.6 billion USD. Apparently, while imports rose the most since February 2008, exports bridged the trade gap by shipping more automobiles and capital goods overseas in July. Cool beans!

But on the downside, unemployment benefits rose from 412,000 to 414,000 last week. When compared to the consensus forecast of 407,000, this figure looks even worse. Clearly, the U.S. is still facing employment problems.

No more reports on tap from the U.S. today! In the meantime, check out the tier 1 reports that other countries are rolling out. Also, the elite G7 countries are set to meet today. Y'all know anything can happen when those big boys come together! For any other major events, I suggest you check out the BabyPips.com economic calendar!