Daily Economic Commentary: United States

[ForexGump]

Spurred by increased risk aversion, the USD managed to rally furiously against most major currencies yesterday. The usual expectation that better-than-expected data coming out of the US would cause a USD sell-off failed to materialize.

In just one day, the Dow Jones Index dropped 1.94% while the S&P 500 Index fell 2.21%, pushing investors to seek the safety of the USD.

The ISM manufacturing PMI for August, which tries to determine whether the manufacturing industry is expanding or contracting, printed a strong 52.9 reading. The forecast stood at 50.6 and July�s figure was only at 48.9. Meanwhile, pending home sales grew 3.2%, higher than the 1.7% increase consensus. The annualized number of total vehicle sold also hit 14 million in August from 11.2 million the month prior.

Today would prove to be another exciting day as the US will be dropping a huge truckload of economic data!

To start off, there�s the challenger job cuts at 11:30 am GMT. It measures change in the number jobs employers are going to cut.

A similar report and more significant report, the ADP non-farm employment change, is due a few minutes after at 12:15 pm GMT. The report tends move markets because investors see it as a leading indicator of the Bureau of Labor Statistic�s non-farm payroll report that will be released on Friday. Economists predict that 250,000 jobs were lost in August, lower than the 371,000 jobs lost the month prior.

At 2:00 pm GMT, the monthly report on factory orders will be released. The total value of new orders put with manufacturers is predicted to have risen by 2.3% in July.

With the number of economic data due for release today, it would be best to be on your toes. We all know how sentiment how fast sentiment could shift!

[ForexGump]

The dollar fell in yesterday�s roller skate, tripping on pebbles of mixed economic data. The dollar couldn�t sustain its run from the past two days, falling against most other majors, as trading was choppy throughout the European and US sessions.

The ADP non-farm employment change report came out worse than expected, printing job losses at 298,000. The figure was expected to be at 250,000. Still, this was a major improvement from July�s printing of 371,000 job losses. Upon the release of the report, we saw some choppy trading although it seemed that the USD was headed for another day of gains.

Over the next couple of hours however, the dollar lost steam as some good data helped boost risk appetite. Factory orders rose by 1.3% from June to July. This was less than the expected 2.3% increase, but still bigger than the upwardly revised 0.9% rise in June. This represented the 5th increase in the past 6 months. The increase was mostly driven by a jump in big ticket items � items that are expected to last 3 years or longer. Normally, such orders are once-in-awhile expenses. Also, take note that there have been massive inventory cuts in the past year. Could the recent increase in orders be because of replenishing inventory, rather than actual demand? Will this lead to a fall in orders in coming months?

The minutes of the last FOMC meeting that followed later in the day revealed that Fed officials are more confident that the recession is coming to a close. Still, they couldn�t say how strong the recovery would be. Once again, Fed officials expressing an optimistic but cautious stance...

Today on the US front, we have the weekly unemployment claims (12:30 pm GMT) � expected to show last week�s claims to be at 563,000 � and the ISM Non-manufacturing PMI report (2:00 pm GMT), which is predicted to print a reading of 48.3, an increase from August�s reading of 46.4.

We could be in line for more choppy trading today, as more hard hitting news is on deck across the globe. Be careful and good luck trading!

[ForexGump]

It's that time of the month again! Yes, you know what I'm talking about... The non-farm payrolls report is due today! My my, it's bound to be a pretty crazy Friday, I can tell...

The USD saw some mixed trading yesterday, as most majors went for the rally-then-reverse routine. Initial jobless claims for the week recorded 570K in unemployment claims, worse than the forecast at 563K but modestly better than last week's 574K reading. Meanwhile, ISM non-manufacturing PMI recorded an improvement from 46.4 to 48.4.

For today's NFP report, a total of 223K in job losses are expected for the month of August. This would be an improvement over July's 247K increase in unemployment... if the actual figure meets or beats the consensus. Just a few days ago, the ADP non-farm employment change report, which is considered a sneak preview of the NFP report, printed 298K in job losses. Although it was significantly better than July's 360K in job losses, it was worse than the consensus of a 250K increase in unemployment. Whatever the actual NFP figure prints, the market is in for some volatility around the time of release at 12:30 pm GMT.

Also due today is the US unemployment rate and average hourly earnings report. The unemployment rate is expected to climb from 9.4% to 9.5% for August. This indicator just came from a surprise drop from 9.5% to 9.4% in July, causing some to think that the labor market woes are over. However, underlying figures show that the dip was a fluke since it was caused by discouraged workers dropping out of the workforce and not improved hiring. We'll see if the same phenomenon took place in August...

It looks like the USD plans to end the week with a big bang! Watch out for fireworks and stay on your toes. Good luck trading!

[ForexGump]

What a bad way to end the week for the USD last Friday. The other majors advanced against the greenback after the NFP report showed that payrolls for the month of August declined at a slower pace than initially predicted. Will the USD continue to slide further?

Payrolls dropped only by 216,000 in August against expectations for a 223,000 lay-offs. The figure may still look huge but it is already a big improvement from the previous month�s 276,000 job losses. Despite the better-than-expected employment change, US�s unemployment rate still surged to 9.7% from 9.4%. While the labor market remains to be weak, the economic growth forecast for this quarter would set the bar for improved worker productivity and, thus, corporate profits.

The market discounted the still weak labor conditions. Risk appetite in the capitals markets surfaced once again. The USD sold off as a result.

Not much will happen today in the US due to a bank holiday.

The US�s unemployment claims for the week ending September 5 and its July trade balance will be released on September 10. The unemployment claims is seen to taper off a little bit to 555,000 from 570,000 while its trade balance is expected to improve marginally to -$26.8 billion from -$27.0 billion.

US�s federal balance and preliminary UoM consumer sentiment are due on September 11. Both accounts are seen to post improvements.

The expected gains in the upcoming economic reports may be bullish for the capitals markets but bearish for the USD.

[boom1]

how much can u tel me

[PipDiddy]

Ho hum, quiet trading for most of the majors yesterday. Save for the USDCAD and GBPUSD, the rest of the pairs were range-bound since the US economic schedule was relatively light. Still, the USD was able to lock in humble gains as investors took some profits off the table.

The only report on Tuesday's schedule was the gauge of economic optimism, which remained below the 50.0 mark. The reading for November stood at 47.9, lower than October's 48.7, indicating that consumers are still pessimistic about economic conditions.

Words from FOMC members Dennis Lockhart and Janet Yellen were far from upbeat as well. Both cautioned that unemployment would remain high for the succeeding years since economic growth wouldn't be strong enough to spur hiring. According to Yellen, the weak labor market and tight household budgets are two of the major hurdles to economic recovery. She expressed her concerns on whether the economy will be able to stand on its own, without the help of the government's stimulus programs.

Low volatility may be in the cards for today as most US and Canadian traders are off on a Veterans Day holiday. Except for the GBPUSD, which could set off fireworks after the release of UK's claimant count change and inflation report, the major currency pairs could keep ranging since the US economic schedule is report-free for the day.

[PipDiddy]

Most of the majors turned on their snooze mode yesterday as the US observed Veterans Day. Given lack of economic flows, the USD was able to rebound against its counterparts to end the session. The USD Index, which measures the performance of the USD relative to a basket of currencies including the EUR, JPY, GBP, CAD, CHF and SEK, gained by as much as 0.3% before closing higher by 0.1%.

No economic reports were due in the US yesterday. Despite this, the S&P 500 was able to mark a new 13-month high to 1,098.51 due to the 16.1% surged in China’s industrial production. Since China is one of US’s major trading partners, a growth in its industrial production could benefit US’s exports. This growth in China’s sector also pushed the AUD to its new yearly high against the dollar to 0.9344. Trading, though, was very tight for the most part of the day. As mentioned earlier, the USD was able to make up for some of its losses against the other majors to close the day.

In the mean time, initial jobless claims for the week ending November 7 is going to be released today at 1:30 pm GMT. The number of people who have applied for unemployment benefits for the first time during the last week is expected to stay flat at 512,000.

The Federal budget balance for the month of October will also be issued later at 7:00 pm GMT. This account measures the difference between the government’s income and expenditures during the month prior. Based on the forecast, the government’s budget deficit is seen to have ballooned to -$152.5 billion from -$46.6 billion. This means that the government needed to ‘borrow’ money by issuing new treasuries to fund its spending that is not covered by its income. Investors could then lose some confidence on the USD given the increased level of government debt.

[PipDiddy]

The dollar finally managed to post some significant gains in yesterday’s trading session. The pause in dollar selling was attributed to Chinese Premier Wen Jiabao’s warning that the world faces an uneven recovery.

US Treasury Secretary Tim Geithner also provided the dollar with much needed support. He said that a strong dollar is needs to be upheld during this time and that the US government is determined to make sure that its budget deficit is put under control. This is quite ironic, given that the Federal Budget Balance released a couple of hours ago showed that the government’s deficit in October grew to a whopping $176.4 billion from $46.6 billion the month prior.

However, some believe the dollar’s move yesterday was simply a technical retracement, as it was in deeply oversold territory. According to them, the move yesterday will simply give a chance for dollar bears to buy the dip.

The initial jobless claims posted its best reading since January this year yesterday, indicating the job losses are starting to slow down. It reported that 502,000 Americans claimed for unemployment insurance for the first time for the week ending November 7, lower than the 512,000 initially expected.

The reports to watch out today are the US trade balance (1:30 pm GMT) and the University of Michigan Consumer Sentiment Survey (2:55 pm GMT).
The trade balance, which measures the net difference in value between imported and exported goods and services, is predicted to show that the US trade gap widened to -$31.8 billion in September from -$30.7 billion in August as demand for imported cars and oil picked up.

Meanwhile, the UoM Consumer Sentiment Survey is expected to show that consumers grew more optimistic this month. The forecast is a reading of 71.1, which an improvement from last month’s revised up reading of 70.6. Increasing optimism is seen as a sign that spending might soon pick up because people tend to spend more if they are more confident about the economy and their financial standing.

[PipDiddy]

Looks like Thursday’s dollar buying was just indeed a technical retracement, as the dollar fell once again on Friday. The dollar fell as risk sentiment picked up on some nice earnings results from US companies.

The trade balance came in to show that the deficit grew more than expected, widening to $36.5 billion in September after sitting at $30.7 billion in August. This marked the largest monthly increase in 10 years. The University of Michigan consumer confidence index dipped to 66.0, way down from October’s reading of 70.6. The index was hurt by the current state of employment. Many believe that the unemployment rate has yet to top out, leaving unemployment as the number one concern forconsumers.

Still, the markets focused mainly on the earnings reports, ignoring the poor data. This left the dollar lagging behind against most other majors.

In other news, Warren Buffet said in an interview that “business have bottomed out” and that economic recovery would need two years. After posting some growth this past quarter, many “experts” have said that the economy could be fully recovered by next year. Buffet also said that the US government needed to get its balance sheet in shape and that it cannot keep running up the debt. Considering that Buffet is the 2nd richest man in the world and probably the greatest investor of all time, I’ll be keeping this in mind over the next year.

I’m looking forward to the US session later today, when retail sales data along with the Empire State manufacturing index will be available at 1:30 pm GMT. The headline retail sales report is expected to show sales growth of 1.0% from September to October, while core sales is projected to have increased by 0.4%. The manufacturing index on the other hand, may dip from 34.6 to 29.9. Will this cause risk aversion to come back into play? Or will traders ignore economic data and continue to sell the dollar?

Also, we’ll know more about business inventories levels when a report comes out at 3:00 pm GMT. Initial predictions are saying that inventory levels have been cut by an additional 0.7% during the month of September. Take note that during this recession, companies have been cutting inventory levels in order to curb expenses and match it to demand.

Lastly, Fed Chairman Ben Bernanke will be speaking about the economic outlook in a forum at 5:00 pm GMT. Will Bernanke express more cautious optimism? Watch out for his speech and stay on your toes!