Daily Economic Commentary: United States

[PipDiddy]

The Greenback's performance was as mixed as a bag of nuts yesterday as it outpaced the European currencies and the Loonie but lost ground to the Aussie and the Kiwi. Will the U.S. dollar find a clearer direction today?

It seems that the Greenback is moving to the tune of fundamentals again as better than expected U.S. economic figures boosted the Greenback against most of its counterparts yesterday. Although the core version of the durable goods orders report missed expectations, the headline figure came in much better than expected as it showed a 1.1% jump. This was more than double the estimated 0.5% uptick, and a considerable improvement over the 0.2% decline seen last April.

But the good news doesn't end there! U.S. pending home sales also beat expectations as it showed a 5.9% increase in May, nearly five times as much as the predicted 1.2% rise. This was a nice rebound over the 5.5% decline seen during the previous month.

The U.S. is set to release its weekly jobless claims data at 12:30 pm GMT today and report 385K in first-time unemployment claimants for the previous week. The final GDP reading for the first quarter is also due 12:30 pm GMT today and no revisions from the 1.9% estimate are expected. Bear in mind that the Greenback seems to be reacting to fundamental data these days, which means that stronger than expected reports could provide support for the currency.

[PipDiddy]

When risk appetite is away, you know the dollar bulls will play! Thanks to risk aversion in markets and the lack of downside surprises in the U.S. data, the Greenback was able to sneak in gains against its counterparts. Will today’s economic reports change the investors’ minds?

Yesterday the U.S. followed up its favorable pending home sales and headline durable goods orders data with a slightly lower figure for the initial jobless claims. Not only that, the U.S. GDP was also confirmed at 1.9%. That’s not half bad compared to other major economies, don’t you think?

The Greenback bulls also got their motivation from risk aversion in markets yesterday. Thanks to euro zone officials dampening expectations for this weekend’s EU Summit, investors wasted no time selling the high-yielding currencies in favor of the Greenback.

Will today’s economic reports change their minds? At 12:30 pm GMT we’ll see the PCE price index along with the personal spending and consumption data. The PCE data is usually closely watched by the Fed, but since the FOMC peeps weren’t worried about it in their last meeting minutes, we’ll just have to watch for any significant surprises!

Around 1:45 to 1:55 pm GMT we’ll also get hold of the Chicago PMI and the revised UoM consumer sentiment report. Both reports are expected to come in at a slightly higher figure this month.

Best of luck in your trades today, homies!

[PipDiddy]

Just like Katie Holmes, we saw the dollar divorce itself from the bulls last Friday as risk appetite soared following the announcements made in the EU Summit.

EUR/USD closed 208 pips above its opening price at 1.2655 while GBP/USD ended the day 146 pips higher at 1.5660. However, the dollar did manage to snag a win against the yen as USD/JPY closed with a 41-pip gain at 79.87.

Much to everyone's surprise, European leaders agreed to use the ESM to recapitalize banks. The outlook going into the meeting had been very bleak. And so, news about EZ leaders taking concrete steps to address the debt crisis allowed investors to breathe a sigh of relief and seek higher-yielding assets. (You can find out more about the EU Summit in my EUR commentary.)

Of course, it also didn't help the dollar that U.S. data released on Friday failed to impress markets. The core PCE index for May, said to be the Fed's preferred measure of inflation, came in at 0.1% versus the 0.2% consensus. We also saw that both personal spending and income disappoint expectations. Analysts were eyeing a modest 0.1% uptick in spending for May but the actual figure came in flat. Meanwhile, personal income only grew by 0.2% and fell short of the market's 0.3% forecast.

The University of Michigan consumer sentiment index for June was also revised down to 73.2 after being previously reported at 74.1.

Only the Chicago PMI came in better than expected at 52.9 versus the 52.8 consensus. But because the actual figure wasn't that much different from the forecast, the report didn't really give the dollar a significant boost.

Perhaps the ISM manufacturing PMI, which is due later at 2:00 pm GMT, can provide the dollar with some support on the charts. The consensus is for the figure to come in at 52.1 but if the actual reading comes in better than expected, we could see the dollar rally. So watch out!

Aside from that, be sure to keep tabs on market sentiment. If investors still feel giddy from what happened during the EU Summit, chances are that the dollar's gains could be limited in today's trading.

[PipDiddy]

With the markets still nursing a hangover from the weekend EU summit, the dollar had a hard time making headway against its major counterparts. Even with a slight bout of risk aversion egging it on, it was unimpressive on the charts as it only managed to post significant gains against the euro.

Surprisingly enough, it actually looked as though the dollar would strengthen after seeing the ISM manufacturing PMI. The index dropped from 53.5 to 49.7 in June, disappointing investors who had sought a reading of 52.1.

Let me put this into perspective for all of y'all. This is the first time in three years that the index fell below the 50.0 critical level, homies! Led by a crash in new orders, the unexpected contraction stoked concern about the U.S. economy, causing markets to react by selling off risk assets.

As a result, the dollar was able to post some decent gains after the report, but unfortunately, the rally wasn't sustained. Maybe the looming prospect of QE3 had something to do with that, eh?

Today, we only have factory orders data on tap, and it's set to print an increase 0f 0.1% after the previous month's 0.6% decline. Though this report normally doesn't have a big impact on the markets, it could end up causing a bit of volatility if it prints a huge surprise, just as yesterday's manufacturing PMI did.

[PipDiddy]

Despite yesterday's positive data, the dollar's price action was as mixed as my Uncle Joe's famous barbecue sauce on the charts. It scored a 30-pip win against the pound and a 29-pip win against the yen but it gave up 21 pips to the euro and 15 pips to the Swiss franc.

Factory orders for May rose by 0.7% and completely erased the decline incurred in April. The figure also topped expectations which was for a modest increase of 0.1%.

Some analysts say that the Greenback's scorecard reflects the market's excitement for the 4th of July festivities. A handful of market junkies might have decided to close their open positions ahead of the U.S. holiday while others might have already set their orders for the much-anticipated NFP report on Friday.

So if you're trading, keep in mind that today is a holiday in the U.S. and we could see lower volume in the market. Happy 4th of July, y'all!

[PipDiddy]

The Greenback was able to smash both the pound and the euro to bits yesterday as investors priced in their bearish expectations on the upcoming central bank interest rate statements. EUR/USD closed the day with a 71-pip loss while GBP/USD suffered a 94-pip defeat.

Apparently, most market participants predict some form of easing from both the European Central Bank (ECB) and the Bank of England (BOE). If you want to know more about the upcoming interest rate statements, just head on over to Forex Gump’s blog. In his latest post, he discusses the market’s forecasts and how they could possibly affect the euro and the pound’s price action.

There are a couple of market-moving events scheduled to happen in the U.S. as well. At 12:15 pm GMT, ADP’s version of the non-farm employment will be released. Since the ADP provides payroll services to many companies in the U.S., the results could give us an idea of how tomorrow’s employment report will come out.

Shortly after, at 12:30 pm GMT, the weekly unemployment claims will be published. It is slated to show that 385,000 people claimed for jobless insurance, which is slightly lower than the previous week’s 386,000.

The last important report due today is the ISM non-manufacturing PMI. It is anticipated to print a reading of 53.1, down from last month’s 53.7.

[PipDiddy]

Looks like the fireworks came one day later! Thanks to the releases of a slew of reports yesterday, the dollar exploded higher, posting massive gains versus the euro and pound. EUR/USD dropped 147 pips before finishing at 1.2389, while GBP/USD closed 72 pips lower at 1.5524.

Thanks to a rate cut by the ECB and the BOE expanding its asset purchase program, the dollar zoomed higher yesterday. One reason why we saw such strong moves was that U.S. traders were just rolling back into the office after the Fourth of July holiday. They had yet to position themselves ahead of the central bank decisions and once they heard that what the ECB and BOE had to say, they simply double downed and started buying the scrilla.

In other news, we got better-than-expected employment data, as both jobless claims and the ADP report printed in the green.

The ADP non-farm employment change report indicated that 176,000 jobs were added to the economy last month, which was much better than the projected 103,000 figure. This was also a nice improvement from the previous release of 136,000.

Meanwhile, unemployment claims came in at just 374,000, which was a pleasant surprise as we’ve seen the 4-week rolling average stay above the 380,000 level the past five weeks. Of course, one week of data doesn’t make a trend, so we’ll have to keep an eye out on this over the next few weeks.

The one bit of bad news we did see during the New York session was the ISM non-manufacturing PMI. The index failed to hit projections of a reading of 53.1, as it printed as just 52.1. Still, this didn’t deter the dollar bulls from rampaging through the markets.

For those of you who missed all the action yesterday, I’ve got some good news for you! The action continues tonight, as we’ve got the granddaddy of all economic reports headed our way at 12:30 pm GMT, the U.S. non-farm payrolls report!

Word on the street is that the report will show a net jobs gain of just 97,000. But seeing as how the ADP report gave us an upside surprise, we may just see the same for today’s NFP report!

In any case, make sure you check out Forex Gump’s latest post for the nitty-gritty on the NFP report!

[PipDiddy]

Thank you bad data! The U.S. dollar once again benefited from safe haven flows as the non-farm payrolls failed to meet market expectations last Friday. The U.S. dollar index, which tracks the currencies performance versus a basket of other major currencies, was able to mark a new monthly high at 83.91.

The U.S. non-farm payrolls showed that 80,000 net jobs were added in June, significantly lower than the 97,000 the market had initially predicted. In addition, the unemployment rate failed to show improvement as it remained at 8.2%. The only “good news” from the non-farm payrolls was that the previous month’s 69,000 was revised up to 77,000.

Strictly speaking, it wasn’t a terrible number, but it was disappointing. The economy is adding more workers but job creation just can’t keep up with the number of people entering the workforce. As a result, the unemployment rate is not improving.

This week, we’ve got a number of red flags on the U.S. economic calendar. Let me list them for you one by one.

On Wednesday, the U.S. trade balance will be released. It’ll come out at 12:30 pm GMT and is expected to show a 48.7 billion USD deficit. Last month, the deficit was at 50.1 billion USD. The FOMC meeting minutes will also be published on the same day at 6:00 pm GMT.

On Thursday, there’s the weekly initial jobless claims report. The forecast is that the number of people who claimed unemployment insurance has increased to 379,000 from 374,000 the previous week.

On Friday, the Producer Price Index and the University of Michigan Consumer Sentiment Survey will print. The PPI is slated to show a 0.5% increase while the consumer sentiment survey is anticipated to show a reading of 73.5.

As you can see, there are a lot of major reports coming out this week. Better keep a close eye on them as they may serve as catalysts for a sentiment shift! Be careful!

[PipDiddy]

Party’s over, boys! With no major data on the docket yesterday, the Greenback pared its gains against some of its counterparts. EUR/USD got a 60-pip breather at 1.2315, while USD/CHF also slid by 52 pips to .9751. What rained on the scrilla’s parade?

Aside from the lack of major data from the U.S., QE3-friendly speeches made by Fed head honchos like John Williams motivated the dollar bulls to take profit. In his speech, Williams called for “extraordinary vigilance,” saying that the Fed is ready to do what’s needed to help the economy. No subtle hints there!

It looks like the Greenback will be a puppet to risk appetite and QE rumors again today as only the IBD/TIPP economic optimism data at 2:00 pm GMT is scheduled for release. My ninja instincts tell me that we’ll hear more from Fed officials today, so keep your eyes peeled for any announcements!

[PipDiddy]

The dollar's scorecard was as mixed as the reviews for the movie Abraham Lincoln: Vampire Hunter. While it scored a 62-pip gain against the euro and was up 16 pips against the pound, it gave up 17 pips to the yen as USD/JPY closed lower at 79.41.

It looks like the lack of economic reports from the U.S. left the dollar directionless on the charts yesterday. But fret not, Padawans! With the minutes of the most recent FOMC meeting due to be released later, I'm pretty sure the dollar will have an action-packed day.

The release is scheduled at 6:00 pm GMT. Traders will be on their toes for the details behind the Fed's interest rate decision as they look for hints about QE3. Remember that on June 20, the central bank decided to extend Operation Twist and downgraded their growth and inflation forecasts for the U.S. economy.

If you don't want to trade the event, maybe you can just play the U.S. trade balance report which is due at 12:30 pm GMT. The forecast is for imports to have exceeded exports by 48.5 billion USD in May. Should the report come in better than expected, we could see the dollar trade higher ahead of the FOMC minutes. Good luck!