Daily Economic Commentary: United States

[PipDiddy]

BAM! Thanks to surprisingly weak economic data and unwinding of short positions, the dollar once again took a backseat against its major counterparts. EUR/USD rose to 1.2572, while USD/CHF also took a nasty 51-pip fall. What gives?

If you’re wondering why the dollar fell against most of its counterparts, look no further than the economic reports released from the U.S. We saw retail sales drop for the second month in a row with the headline figure down by 0.2% while the core figure also slipping by 0.4%. With the surprisingly weak NFP report that we saw a couple of weeks ago, were you really surprised that spending was also a dud?

Traders probably wouldn’t have reacted as strongly to the weak data if only the producer price index data didn’t also disappoint expectations. The PPI report showed a 1.0% decline in May, which is not only weaker than April’s 0.2% decline, but is also behind the -0.6% expectations. Good thing that the core PPI and business inventory numbers showed no changes from their previous readings, which helped limit the Greenback’s losses.

Apparently, traders put the weak NFP, retail sales, and PPI together and concluded that the Fed will most likely pull the trigger on QE3 next week. After all, Bernanke had mentioned in his last speech that the central bank is willing to act in case economic reports deteriorate. Guess what? They kinda have.

Don’t count your eggs before they hatch though, as traders will most likely wait for the CPI, initial jobless claims, and the U.S. current account reports coming up at 12:30 pm GMT. If inflation in the U.S. turns out softer than what investors are expecting, then we might see more QE3 speculations as there will be fewer obstacles for the Fed to implement QE3.

Don’t even think of missing these reports!

[PipDiddy]

And the Biggest Loser is... The Greenback! Weak economic data from the U.S. triggered another sharp dollar selloff yesterday as traders priced in the increased odds of QE3. Will the Greenback have a chance to redeem itself today?

U.S. inflation data came in weaker than expected yesterday as the headline CPI posted a 0.3% drop in price levels, larger than the estimated 0.2% decline. The core figure, on the other hand, came in line with consensus of a 0.2% uptick but still reflected a slowdown in inflation. With that, the Fed could have more room to implement further easing, especially since other economic data show that the U.S. could definitely use some stimulus.

Weekly jobless claims also came in worse than expected, with the reading chalking up a 386K rise in first-time claimants. This was higher than the previous week's 380K reading and the consensus of 377K, showing that the jobs situation isn't exactly improving in the country.

Their current account balance also came in the red as it printed a 137 billion USD deficit, wider than the estimated 132 billion USD shortfall and the previous month's 119 billion USD current account deficit. This first quarter reading was the largest deficit in three years.

Today, the U.S. is set to print its Empire State manufacturing index and its University of Michigan consumer sentiment reading. The manufacturing index is slated to show a drop from 17.1 to 13.6 for June while the consumer sentiment report is expected to fall from 79.3 to 77.5, both of which reflecting a downturn in economic performance. Another round of weaker than expected figures could be the nail in the coffin for the Greenback as this would increase the likelihood of QE3 from the Fed next week, so stay tuned for these reports!

[PipDiddy]

That’s gotta hurt! The Greenback suffered a triple roundhouse kick against its counterparts last Friday as traders reacted to weak economic data. USD/JPY plummeted by 68 pips, while Cable shot up by 142 pips. Thing is, the U.S. data wasn’t the only wet blanket for the dollar bulls.

Data from the U.S. only fueled the bears’ party last Friday as they supported arguments for more of the Fed’s QE. The Empire State manufacturing index came in at 2.3 in June, the slowest pace in seven months. The TIC long-term purchases also disappointed expectations of 45.3 billion USD by clocking in at at 25.6 billion USD.

And don’t get me started on industrial production report which came in at -0.1% after showing a 1.0% growth in April! Meanwhile, capacity utilization also missed estimates of 79.2% by printing at just 79.0%. Last but definitely not the least, the preliminary reading of the University of Michigan consumer sentiment came in at 74.1 in June, which is not only a huge drop from 79.3, but also marks the six-month low for the data.

As if QE speculations aren’t enough, it also hurt the scrilla that traders were paring their short positions on high-yielding currencies ahead of the “Greekend” elections!

Will the Greenback recover some its losses today? Only the NAHB housing market index at 2:00 pm GMT is scheduled for release today, but make sure you got an eye out for the big G20 meeting starting today! Who knows, maybe we’ll hear more about additional easing from the world leaders!

[PipDiddy]

The Greenback's performance was as mixed as the reviews for the movie Rock of Ages as the lack of top-tier economic events left the major currencies in disarray. The U.S. dollar was able to end the day higher against the European currencies but it lost a bit of ground to the comdolls. Will it find a clearer direction today?

It seems that the euphoria over the recently concluded Greek elections fizzled quickly as the safe-haven Greenback jumped to the top of the charts against most currencies yesterday. On top of that, news about the spike in Spanish bond yields sent traders scurrying back to the safe-havens.

Today, the U.S. is set to release its building permits and housing starts data for May. Building permits are projected to climb from 0.72 million to 0.73 million while housing starts are estimated to stay at 0.72 million during the month. Weaker than expected U.S. data could dampen demand for the Greenback if fundamentals prevail again, especially since the much-awaited FOMC statement is coming up this week. Better stay tuned for the housing data release at 12:30 pm GMT!

[PipDiddy]

The safe haven Greenback fell against most major currencies yesterday as the rising equities and commodity prices stoked risk appetite. The U.S. Dollar Index closed the day at 81.88, 0.55 points lower from its opening level during the Asian trading session.

As the fears of an imminent “Grexit” subside, and with the G20 suggesting that they would support struggling nations, it seems that demand for the Greenback has greatly declined.

The better-than-expected result on the building permits report also boosted the Greenback. It came in at 780,000 versus the 730,000 forecast. The housing starts report, however, failed to meet forecast. It printed a 710,000 figure, which was slightly lower than the 720,000 consensus.

Today is a significant day for the Greenback as the Federal Reserve is scheduled to announce its decision on interest rates. Most market participants expect no change on the benchmark interest rate, but believe that the central bank will implement some sort of easing. Forex Gump delves more into this issue in one of his recent blog posts. Check it out!

[PipDiddy]

Extra, extra! Read all about it! The Fed does the Twist again! Instead of implementing QE3 as many expected, the FOMC simply decided to extend Operation Twist until the end of 2012. It seems like the Greenback didn't know how to take this news as it was all over the place after the announcement. Will it find a clearer direction today?

During their recent monetary policy statement, the FOMC kept interest rates on hold and decided against implementing aggressive easing measures. Many were disappointed to find out that the Fed only opted to extend its ongoing Operation Twist program since recent economic figures seemed to show that the U.S. economy was in dire need of stimulus.

The Fed also lowered their economic forecasts and maintained that they were ready to provide support for the economy if necessary. They now expect GDP growth to be around 1.9% to 2.4%, lower than the previous estimates between 2.4% to 2.9%.

The U.S. still has a bunch of red flags on today's schedule so the Greenback could be in for yet another exciting day. First up, we have the initial jobless claims report due 12:30 pm GMT. This could show that first-time claimants are down from 386K the other week to 381K last week. Later on, at 2:00 pm GMT, the U.S. will release its existing home sales figure and the Philly Fed index. Existing home sales are expecting a slight dip in May while the Philly Fed index could improve from -5.8 to 0.7.

Now that the Fed has already put QE3 out of the picture for now, the U.S. dollar might be able to rely on risk sentiment as its major driving factor again. In that case, stronger than expected figures from the U.S. could spur risk appetite and send the safe-haven U.S. dollar lower. On the other hand, worse than expected reports could boost demand for the Greenback. Be mindful though that the U.S. dollar might still be sensitive to fundamentals, so this could get really tricky!

[PipDiddy]

The dollar bulls returned in full force yesterday as a chockfull of weak data from the U.S. and other parts of the world hurt risk sentiment. The U.S. dollar index which tracks the performance of the Greenback versus a basket of currencies rose to end the U.S. trading session at 82.81, 0.84 points from its opening level that day.

The weekly unemployment claims fell slightly to 387,000 versus last week’s 389,000. It was also worse than the 381,000 figure the market had initially expected.

Meanwhile, the existing home sales report, which measures the annualized number of pre-owned residential buildings that were sold the previous month, came in at 4.55 million, 300,000 lower than forecast.

And finally, the Philly Fed Manufacturing index contracted sharply as it showed a reading of -16.6. It was almost 16 points lower than forecast and it is the lowest reading since September 2011.

No major news report due to come out today, but with stocks and commodities in the red, the dollar's recent strengthening trend appears to again be gaining momentum.

[PipDiddy]

Break time! Last Friday’s lack of major data in the U.S. inspired the dollar bulls to take a breather from their push last Thursday. The Greenback capped the day unchanged against its major counterparts with EUR/USD closing only 15 pips higher than its open price.

All eyes were on the euro zone last Friday as Germany’s Angela Merkel had a closed door meeting with Spain’s Mariano Rajoy, Italy’s Mario Monti, and France’s Francois Hollande.

Let’s see if the economic data scheduled from the U.S. will get back the investors’ attention. For starters, we’ll see the new home sales data at 2:00 pm GMT followed by the S&P home price index tomorrow at 1:00 pm GMT and the CB consumer confidence and Richmond manufacturing index at 2:00 pm GMT.

On Wednesday at 12:30 pm GMT we’ll get hold of the durable goods orders data, which will be followed by the pending home sales report at 2:00 pm GMT. Lastly, the final quarterly GDP numbers will be printed with the initial jobless claims on Thursday at 12:30 pm GMT, while the Chicago PMI and the PCE reports will be released on Friday.

Phew! That’s a lot of potential market movers! Just remember to have a trading plan ready if you’re trading any of these, aight?

[PipDiddy]

We got mixed results from the dollar yesterday as it strengthened against the euro, Swissy, and the comdolls, but weakened against the yen and the pound. What can we expect from it today?

It seems there was a tinge of risk aversion in the markets yesterday as the dollar managed to post gains against most of its counterparts. Investors are losing hope that the two-day summit of European leaders (scheduled later in the week) will yield anything productive. Oh ye of little faith!

On a more positive note, the U.S. got a bit of good news on the domestic front, as the new home sales report for May printed above forecasts. The annualized number of new single-family homes rose from 343,000 to 369,000 last month, rather than to 347,000 as many had expected.

Up ahead, we have the CB consumer confidence report coming out at 2:00 pm GMT. According to forecasts, we'll likely see the index drop from 64.9 to 63.8. Though this report has the potential to move the markets, risk sentiment will probably still be key to trading the dollar today. Remember, in times of risk aversion, the dollar is king!

[PipDiddy]

Mixed day for the scrilla, as it took some decent hits against the pound, the Australian dollar, and the yen but came away with small victories against the euro and the Swiss franc. Will we see more of the same today or are we in for more definitive trading?

One reason the dollar may have slumped yesterday as the Conference Board consumer confidence index came in worse-than-expected and printed at 62.0. Expectations were that the index would come in at 63.8. Take note that this marks the lowest reading in five months and indicates that Average Joes across the country are losing confidence in the state of the economy.

Meanwhile, the Case-Schiller HPI showed that the housing market is still down in the dumps, as home prices have dropped 1.9% year-on-year. Housing prices have been in a steady decline for 18 months now, and it doesn’t seem to be getting much better.

For today, we’ve got two top-tier reports being released that could prove to be major market movers during the New York session.

First, we’ve got durable goods orders heading our way at 12:30 pm GMT. Expectations are that core orders rose by 0.9% last month, while headline orders increased by 0.5%.

Then later on at 2:00 pm GMT, pending home sales data will be released. Word on the street is that the annualized pace of sales rose by 1.2% last month, which would be a massive improvement from the 5.5% decline we saw the month before.

If both these reports come in better-than-expected, it could boost risk appetite which could lead to some risk-taking in the markets. But of course, you never know how the markets will react, so make sure you practice good risk management techniques homies!