Daily Economic Commentary: United States

[PipDiddy]

As risk appetite picked up in yesterday's trading, the dollar had to let go of some of its gains to the euro and the comdolls. But don't fret! Market analysts say that the dollar's break from the bulls yesterday is nowhere as serious as the R. Pats-Kristen Stewart break up.

EUR/USD ended the day 85 pips higher at 1.2156. The dollar also gave up 61 pips to the Aussie as AUD/USD finished at 1.0312 and 21 pips to the Kiwi when NZD/USD closed at .7887.

Sure, aside from the improvement in market sentiment stemming from comments from ECB officials, we can't deny that the disappointing housing report from the U.S. might have also weighed down on the dollar's performance. New home sales sold in June were lower than expected at 350,000 while the forecast was up at 372,000.

However, I doubt that the report will be a crucial factor in the Fed's decision whether or not to pull the trigger on QE3. And so, I don't think that the figure will have a long-term effect on the dollar.

For today, a few reports are on tap for the dollar and they could once again affect the dollar's price action in the short-term. So make sure you're on your toes for 'em!

Data on durable goods and unemployment claims are due to be released at 12:30 pm GMT. It is expected that purchase orders received by manufacturers grew by 0.4% in June. Excluding big-ticket items, core durable goods are anticipated to print a 0.1% uptick. Meanwhile, unemployment claims are seen to come in at 381,000.

Then at 2:00 pm GMT, pending home sales for June is eyed to come in at 0.6%.

[PipDiddy]

Play time's over, folks! Dollar bears mean business! They took EUR/USD up 131 pips to 1.2287, while pushing GBP/USD 192 higher to end the day at 1.5691. The reason? Improved risk appetite! Are we witnessing a change in trend here?

Thanks to some surprisingly supportive comments from the ECB, the markets staged an incredible risk rally. But the dollar found itself on the wrong end of the anti-safe haven flows as it was dumped in favor of higher-yielding currencies.

On the domestic front, the U.S. published a few reports of its own, but none of them were able to provide support for the dollar.

Durable goods orders were up 1.6% last month, which is 4 times the increase that had been forecasted. But apparently, the bulk of the growth is owed to transportation items, as core durable orders (which excludes transportation items) actually fell 1.1% in June, registering well below the expected 0.1% uptick.

Meanwhile, initial jobless claims of 353,000 (versus 381,000) took the four-week moving average down to its lowest level since April 2012. With numbers like that, one can't help but wonder whether the labor market is getting ready to stage a comeback!

Finally, the latest pending home sales report showed that sales dropped 1.4% in June after rising 5.4% the in May.

Today, the action picks up with the release of the U.S. advance Q2 2012 GDP report, which most believe will register a growth of 1.5% growth. But be on the lookout for a downside surprise, fellas! Recent reports from the U.S. have been anything but impressive. As a matter of fact, if you'll recall, we saw negative retail sales growth for every month of Q2! That's not exactly good news considering consumer spending makes up about 70% of the U.S. economy! In any case, be ready for some crazy moves when the report is released at 12:30 pm GMT.

[PipDiddy]

Pip-party? What party? Dollar bulls missed out on the pip-filled action on Friday as risk appetite kicked in. EUR/USD ended the week with a 13-pip gain for the day at 1.2300. Meanwhile, GBP/USD rallied to finish Friday 32 pips above its opening price at 1.5724.

Risk appetite was sustained thanks to some EU leaders promising that they too (ECB President Mario Draghi also made the commitment earlier on in the week) would do everything to ensure the euro's survival. Aside from that, the U.S. GDP report might have also helped improve market sentiment.

According to our trusty forex calendar, the consensus was for economic growth to come in at an annualized rate of 1.4% in Q2 2012. The actual figure showed that the economy actually expanded by 1.5% compared to a year ago.

Sure, the discrepancy between the forecast and the actual figure is small. However, that was enough for most traders to hope that the Fed wouldn't be too excited about announcing its plans for QE3.

For today, we don't have any economic reports on tap from the U.S. But we do have a couple of top-tier events for the euro. It would do you well to keep tabs on them as they could affect market sentiment in today's trading. Head on over to my EUR commentary to find out all about them!

[PipDiddy]

Due to the absence of market-moving events yesterday, selling pressure on the Greenback eased. We saw the Greenback recover across the board as closed the U.S. trading session 41 pips higher versus the euro and 17 higher pips against the pound.

Yesterday’s price action seems to reflect some of the uncertainty surrounding the upcoming European Central Bank (ECB) interest rate decision on Thursday. Market participants suspect it will disappoint and that the ECB will simply demand more action from governments before making a move.

For today, there are a couple of important economic reports on deck that could affect the Greenback’s direction. Specifically, we’ll see the Core PCE Price Index (12:30 pm GMT), the Chicago PMI (1:45 pm GMT), and the CB Consumer Confidence Survey (2:00 pm GMT).

The Core PCE Price Index is expected to show that there was a 0.2% increase in the price of goods and services, excluding food and energy, bought by consumers for the month of June.

Meanwhile, the Chicago PMI is slated to print a reading of 52.6, slightly worse than the reading seen the previous month.

Lastly, the CB Consumer Confidence survey is anticipated to show a 61.5 figure, half a point lower than last month.

If the reports come in worse-than-expected, risk aversion could intensify and lead to another dollar rally.

[PipDiddy]

Mixed results for the scrila yesterday, as it edged ahead of the pound and the comdolls, but struggled against the euro and franc. Could we see more convincing moves today as the FOMC makes its interest rate decision?

Speaking of interest rates, the core PCE index came in yesterday just as expected, indicating that monthly inflation remains subdued at 0.2%. Now, inflation and interest rates aren’t exactly 100% positively correlated, but as long as inflation remains subdued, it gives the Fed a lot more leeway to keep interest rates low or even to introduce additional quantitative easing measures into the market.

In other news, we did get two other bits of good results in the form of the Chicago PMI and CB consumer confidence index. The Chicago PMI printed a better-than-expected score of 53.7, after it was projected to come in at 52.6. Meanwhile, the confidence index rose from 62.7 to 65.9, after it was anticipated to drop to 61.5.

These results were a breath of fresh air for the U.S. economy, which hasn’t exactly been lighting of the economic board with good data recently.

We could be in for some crazy moves tonight, as we’ve three red flags going up today.

First, we’ve got the ADP employment report at 12:15 pm GMT. Word on the street is that an additional 121,000 jobs were added to the economy last month. Keep in mind that last month’s release came in much better than expected, so lets see if we can see a repeat today.

Next, the ISM manufacturing PMI will hit the airwaves at 2:00 pm GMT. My sources tell me that we’ll see a minor improvement as the index is projected to climb up to 50.3. If the index prints much higher than that, it could give the dollar a boost.

But of course, we could see nothing happen until 6:15 pm GMT, which is when the FOMC statement is due. Will FOMC members drop some clues about the central bank’s future plans? Who knows! Just know that this is a major market mover, so be careful if you have any positions open at that time!

[PipDiddy]

Light the fireworks! Pop the Champagne! The Greenback has rebounded! Thanks to the Fed’s interest rate statement, the Greenback was able to rally versus other major currencies. The U.S. dollar index rose convincingly above the 83.00 handle and is currently trading at 83.56.

The Fed offered nothing new in its statement, which caused traders to price out their QE3 expectations. According to the central bank, economic activity during the first half of the year decelerated. Employment growth slowed while inflation has declined. The Fed expects growth to remain moderate but the strains they also believe that there are a lot of downside risks to the outlook due to the strains in the global financial market.

On the economic front, results were mixed. The ADP non-farm employment change came in better than expected at 163,000. On the other hand, the ISM Manufacturing PMI printed a 48.8 reading, below the 50.3 reading the market had initially predicted.

No tier 1 data on the docket today but we will see the U.S. unemployment claims and factory orders report. The unemployment claims is slated to show that the number of people who claimed for jobless insurance rose to 375,000 last week from 353,000 the week prior. Meanwhile, factory orders are expected to have increased by 0.4%.

[PipDiddy]

Though the Greenback wasn’t the life of the party yesterday, it came out victorious against its counterparts. EUR/USD capped the day below 1.2200 after tipping a high at 1.2400 while USD/CHF made a 170-pip recovery from its intraday low. Now that’s my kind of price action!

All eyes were on Mario Draghi yesterday as he tried to fulfill expectations for more ECB intervention in markets. I wrote the details of the ECB decision in my EUR piece today, but all you really gotta know is that traders were disappointed with Draghi’s speech. Heck, EUR/USD dropped by 200 pips in less than 2 hours!

Today the scrilla will be back on the investors’ radar today sas the granddaddy of economic reports, the NFP, is released at 12:30 pm GMT. The better-than-expected ADP report last Wednesday and stronger-than-expected Challenger job cuts data (-44.5% vs. -9.4%) and initial jobless claims (365K vs. 375K) might be the reasons why investors are expecting the figure to come in at 100,000 in July. My man Forex Gump even wrote a piece on it!

In other news, the U.S. factory orders slipped by 0.5% in June thanks to a decline in demand for business equipment and demand for non-durable goods.

Will today’s NFP report complete a trio of disappointment that the Fed and the ECB started this week? The data will be released along with the unemployment rate (expected to remain at 8.2%) and the ISM non-manufacturing PMI at 2:00 pm GMT so you better keep your eyes peeled!

[PipDiddy]

The dollar got sent to the bear lair of its higher-yielding counterparts on Friday following the mixed employment report from the U.S. EUR/USD finished the day at 1.2381 after opening at 1.2180 while GBP/USD ended Friday 133 pips above its opening price at 1.5644.

Data for July showed that 163,000 jobs were created during the month. Not only was the figure more than twice June's NFP reading of 64,000, it also topped forecasts for a 100,000 growth in jobs! On top of that, the rise translates to the biggest job growth since February when we saw 240,000 payrolls.

The ISM non-manufacturing PMI also beat forecasts when it came in better than expected for July at 52.6. Many were just expecting it to match it's previous reading of 52.1.

On the not-so-bright side of things though, the unemployment rate rose to 8.3% for the month, disappointing the consensus which was for it to remain steady at 8.2%.

To help understand the mixed figures, you must know that the government conducts two surveys to collect data. The business survey revealed an increase in jobs which explains the positive NFP number. The household survey, on the other hand, showed a decline in jobs which is reflected by the uptick in the unemployment rate.

Although market junkies say that the business survey is more reliable, most are still not that impressed with the rise in jobs for July. A few analysts say that they're still expecting the Fed to announce some stimulus measures in its FOMC meeting in September.

Today our forex calendar is blank for reports from the U.S. With that said, don't be surprised to see the effect of Friday's NFP report linger a little longer on the dollar. Good luck!

[PipDiddy]

The Greenback ended the day almost unchanged against its counterparts yesterday as traders took a breather from the huge moves that we saw last week. Heck EUR/USD capped the day just 7 pips lower than its open price! Can you guess the currency that gained 27 pips on the scrilla?

If you guessed the yen, then you better give yourself a pat on the back! Uncle Sam didn’t release any major economic data yesterday, but speculations that the BOJ would maintain its interest rates and bond purchases steady dragged USD/JPY to close at 78.21.

Only Big Ben’s speech at 6:30 am GMT and the consumer credit data at 7:00 am GMT are scheduled for release today, so you might want to pay attention to the euro zone in case there are news reports that might impact risk sentiment.

[PipDiddy]

The Greenback's performance was as mixed as a bag of nuts yesterday as the U.S. currency gained against most of its major counterparts but lost ground to the Canadian dollar and Swiss franc. Will the Greenback be able to find a clearer direction today?

The lack of hard-hitting reports from the U.S. may be to blame for the Greenback's mixed performance yesterday and we just might see the same scenario today. A couple of medium-tier reports, namely the preliminary non-farm productivity and unit labor costs, are set for release at 12:30 pm GMT but these aren't likely to have a huge impact on the Greenback's price action nor on risk sentiment.

With that, better keep your eyes and ears peeled for any other events that might influence risk appetite today. Good luck!