Daily Economic Commentary: United States

[PipDiddy]

The dollar got its butt kicked yesterday just like Jean-Claude Van Damme did in The Expendables 2. EUR/USD finished the day 54 pips above its opening price at 1.2522 while GBP/USD closed with a 91-pip gain at 1.5867. On the other hand, USD/JPY was 70 pips lower from its opening price at 78.54.

So why did the dollar get whooped in yesterday's trading?

Contrary to what most market junkies were expecting, the FOMC meeting minutes showed that the Fed is eager on providing the economy with more stimulus. The Fed said in its statement that "substantial and sustainable" signs of economic growth are absent. And so, further monetary policy easing may be "warranted fairly soon."

Of course, those remarks gave dollar bears enough piptorade to hustle some muscle. Some market junkies say that we could see the central bank take more action as early as September!

Since the minutes gave markets a clear indication on the Fed's stance regarding further easing, after being vague about it in the past few months, it may likely continue to dictate price action in today's trading. I doubt that traders will be quick to forget the dovishness.

However, who knows, perhaps the dollar could pare some of its gains should updates come out from the euro zone and spark risk aversion. Or maybe the dollar could find some support on the charts with the roster of economic reports we have on tap today.

The unemployment claims is due to come in at 12:30 pm GMT and it is eyed at 365,000. Then at 1:00 pm GMT, the U.S. flash manufacturing PMI for August is seen at 51.3. Last but not the least, new home sales for July is anticipated to print at 363,000.

Better-than-expected figures could help keep the dollar afloat while worse-than-expected figures could send it lower as they would affirm the Fed's eagerness for more stimulus. So watch out for

[PipDiddy]

The Greenback was generally weaker yesterday as the dovish FOMC meeting minutes continued to weigh down heavily on the currency. The U.S. dollar index which tracks the performance of the Greenback versus other major currencies fell for the fourth day in a row to 81.44.

Economic data released from the U.S. were mixed though. The weekly unemployment claims failed to meet forecast and rose from 368,000 to 372,000 instead of falling to 365,000. On the other hand, the new home sales came in better than expected at 372,000. The consensus was 363,000.

Today, the only red flag on the forex calendar is the durable goods orders report. The headline version is projected to show a 2.6% gain while the core version is predicted to only show a 0.5% increase. If the actual results turn out to be worse than forecast, it could lead to a sell-off in the Greenback. Any negative data could be seen by the market as another reason for the FOCM implement another round of monetary easing.

[PipDiddy]

Finally! After giving up pips to its counterparts one day after another, the dollar managed to pare some of its losses on Friday. EUR/USD closed the week at 1.2512, 50 pips below Friday's opening price. Meanwhile, GBP/USD was down 56 pips for the day at 1.5804.

But don't get too excited about the dollar's gains from Friday, just yet! For one, the durable goods orders report for July printed mixed figures and gave investors very little reason to be bullish on the Greenback. Although the headline reading printed at 4.2% and topped expectations at 2.6%, the core figure showed a 0.4% decline and disappointed the 0.5% forecast.

Market junkies say that the dollar's price action on Friday was nothing more than just profit-taking for traders who have had short-USD positions for the most part of the week. Boo!

Don't worry though! We have a few top-tier reports from the U.S. this week which includes the preliminary GDP report for Q2 2012, pending home sales for July, and the Fed's Beige Book. These reports would shed some light on the economy's health and possibly paint a brighter picture for the U.S. If they come in better-than-expected, we may just see the dollar rally!

So make sure you check them out on our forex calendar and take note of their release, ayt?

[PipDiddy]

Amid the very light economic calendar in yesterday's trading session, the Greenback was able to come out victorious. It edged higher against most major currencies, rallying 13 pips versus the euro, 22 pips versus the pound, and 10 pips versus the yen. Can the Greenback continue its streak?

As I mentioned, there was an absence of economic events yesterday as the U.S. didn’t release any economic data. Today, however, there are two important news lined up.

At 1:00 pm GMT, the S&P/Case-Schiller Composite-20 House Price Index will be published. It’s expected to show that the average selling price of homes declined 0.3% in June. In May, the HPI recorded a 0.7% decrease.

At 2:00 pm GMT, the CB Consumer Confidence survey will come out. It’s slated to print a reading of 65.8, which is tick lower than the previous month’s 65.9. Given how fundamentals have been driving the Greenback’s price action recently, better-than-expected figures could help the currency maintain its rally.

Let’s see how these reports will affect the market today!

[PipDiddy]

Not today, boys! The dollar bulls weren’t strong enough to outmuscle the bears yesterday as traders priced in a QE3 announcement from the Fed. Heck, the Greenback fell against the euro, pound, yen, and even the franc! Does this mean that QE3 is a done deal?

Not necessarily. While some analysts say that the lack of ECB and SNB participation in this weekend’s Jackson Hole meeting all point to a QE3 announcement from Big Ben, some market players still think that the Fed head will wait for the NFP report coming up on September 7 before he announces anything QE3-related.

Economic reports from Uncle Sam weren’t any help either. The S&P house price index and the Richmond manufacturing might have exceeded investors’ expectations, but the CB consumer confidence ended up printing at its lowest level in 2012. For many market junkies, the mixed data won’t influence the Fed’s decision much.

Maybe the quarterly preliminary GDP report at 12:30 pm GMT will liven things up for the dollar bulls and bears. The data is expected to come in at 1.7% after clocking in at 1.5% last quarter. The pending home sales data at 2:00 pm GMT is scheduled to follow, with analysts placing their bets on a 1.1% increase against last month’s -1.4% reading.

Last but not the least, the Beige book report will be printed at 6:00 pm GMT. Since the data is a consolidation of the economic performance of each of the 12 Fed districts, market players will watch the release closely. Have conditions in the districts improved, or have they deteriorated enough to warrant a QE3? Stay glued to the tube for this one!

[PipDiddy]

It looks like better-than-expected data from the U.S. wowed investors on Wednesday and encouraged them to buy the dollar. Consequently, the Greenback ended yesterday's trading in the green against most of its counterparts.

EUR/USD closed the day 38 pips below its opening price at 1.2530. Meanwhile, USD/JPY finished with a 17-pip win at 78.69.

The preliminary U.S. GDP report printed in line with expectations. It showed that the economy actually grew by 1.7% in Q2 2012 and not just by 1.5% as previously reported. Meanwhile, data on pending home sales topped expectations when it came in at 2.4% versus the 1.1% forecast.

What about the Beige Book, you ask?

The report didn't really provide any clarity on the U.S. economy. While some Fed districts reported improvements in employment and consumer spending, there were those who said that the sluggish growth of the manufacturing sector is weighing down economic conditions.

To get more insight on the economy and what the Fed's intentions are for future monetary policy, we just have to keep tabs on the Jackson Hole Symposium. Forex Gump wrote an article about what to expect from the event. You should check it out!

Also be on your toes for the reports we have scheduled for the dollar today. At 12:30 pm GMT, the jobless claims report will be on tap and it is eyed at 370,000. Along with it, the core PCE index is anticipated to come in at 0.1%. Keep in mind that it is widely perceived as the Fed's preferred indicator for inflation. And so, the figure may just affect Ben Bernanke's tone in this weekend's symposium.

[PipDiddy]

Some of yesterday's reports may have printed in the red, but that didn't stop the dollar from staging a solid rally! Buoyed by pre-Bernanke speech expectations, it was in hot demand as traders unloaded their holdings of risk assets. As a result, the American currency gained against all of its major counterparts except for the yen.

You'd think the markets would at least think twice about buying the Greenback after seeing yesterday's reports! After all, not only did jobless claims rise to 374,000 (forecasts called for 370,000) last week, but the previous week's record was also revised up from 372,000 to 374,000.

Meanwhile, the core PCE price index registered a 0.0% change in prices last month, which is slightly lower than the 0.1% that most analysts had predicted.

It seems the only positive bit of data that we got was the personal spending report. It printed a growth of 0.4% as expected, which just so happens to indicate the first increase in consumer spending in 3 months.

But enough about that, let's talk about what could happen later on!

The U.S. is set to publish the Chicago PMI (expected to fall from 53.7 to 53.6) at 1:45 pm GMT and the revised UoM consumer sentiment report (expected to rise from 73.6 to 73.7) at 1:55 pm GMT. But no doubt, the highlight of the day will be Ben Bernanke's speech at the Jackson Hole Symposium, scheduled at 2:00 pm GMT.

From the looks of it, many economists are anticipating disappointing words from the Fed head. And it makes sense! It seems unlikely that the Fed will commit to more easing without completing its economic forecasts. After all, policymakers wouldn't want to end up making a big announcement (QE3?) only to change their minds later on when more information comes their way, right?

In any case, if you want to learn more about what you should expect from Jackson Hole, I suggest y'all read Forex Gump's take on the Two Issues to Focus on At Jackson Hole. Good luck, fellas! End the month on a high note!

[PipDiddy]

Big Ben Bernanke pulled a "Draghi" during his Jackson Hole speech last Friday as he disappointed the markets when he neither confirmed nor denied that the Fed was ready for QE3. With that, the Greenback ended the day lower against most of its major counterparts as most traders still believed that further easing was on the table.

As my buddy Forex Gump predicted after seeing the Beige Book report, Fed head Bernanke gave vague statements on whether QE3 was necessary or not during his latest speech in Jackson Hole. Bernanke simply stated the obvious, which was that the U.S. labor market wasn't doing so well and that higher unemployment could be their economy's undoing. He also pointed out that the U.S. economy was still facing several risks from the euro zone debt crisis and from their very own Fiscal Cliff.

With U.S. traders on a bank holiday today, the rest of the market participants could be left mulling about Bernanke's latest speech. Should expect QE3 for the upcoming FOMC statement? Or will the Fed simply reiterate their pledge to keep rates exceptionally low for an extended period?

Don't forget that, with the August NFP figure due on Friday, this week is a crucial one when it comes to the Fed's assessment of U.S. economic performance and not to mention their monetary policy decision. Other than the ISM manufacturing PMI due tomorrow and the non-manufacturing PMI due Thursday, there are no other red flags on the U.S. calendar, which means that we might see a lot of consolidation prior to NFP Friday!

[PipDiddy]

The safe haven Greenback struggled to remain afloat yesterday as Bernanke’s Jackson Hole QE message lingered in the market. The U.S. dollar index, which tracks the performance of the currency versus other majors, fell slightly to 81.66 from 81.70.

U.S. data was non-existent yesterday as most of the country was out on holiday in observance of Labor Day. With the festivities over, it’s going to be business as usual today.

At 2:00 pm GMT, the ISM Manufacturing PMI will be released. It’s anticipated to print a reading of 51.9, similar to the reading we saw one month prior. The report usually has a significant impact on price action, so pay attention to the actual results. A higher-than-expected reading could help the Greenback recover some of its losses from the past few trading sessions.

[PipDiddy]

Are risk aversion and the Greenback best friends again? It looks like the U.S. dollar was able to benefit from the risk off environment yesterday as it ended higher against most of its major counterparts. Check out the latest U.S. data to see how it all panned out!

The U.S. manufacturing industry contracted once again in August as the ISM manufacturing PMI for the month slipped from 49.8 to 49.6 instead of rising to 50.0. This marks the third consecutive month of contraction in the industry as new orders and hiring dropped.

There are no red flags on the U.S. economic schedule for today, which means that we'll see either a lot of consolidation or positioning ahead of the top-tier reports due later on. Better use this time to read up on the upcoming ISM non-manufacturing PMI tomorrow and the NFP report on Friday!