Daily Economic Commentary: United States

Trading Discussion News and Economy
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Move over Greece, the U.S. just might have its own debt drama soon! Thanks to a warning from credit rating agency Fitch, the U.S. dollar lost ground against its major counterparts yesterday. Because of that, EUR/USD reached the 1.4400 handle while USD/JPY ended 17 pips above the 80.00 mark. Will the Greenback keep losing today?

Debt problems took center stage again yesterday, but this time it wasn’t in the euro zone. Apparently, several U.S. lawmakers voted against raising the debt ceiling even though the U.S. already reached their debt limit last month.

However, credit rating agency Fitch wasn’t pleased about this bickering. They warned that they’ll put U.S. debt on negative watch if they fail to adjust their debt ceiling by August 2. On top of that, they’ll also downgrade U.S. debt to “restrictive default” if they fail to make their first payment on August 15. Uh oh, Uncle Sam better get his act together really soon!

Today, the Fed is scheduled to make its monetary policy announcement at 4:30 pm GMT. As always, Ben Bernanke is expected to retain the “extended period” phrase in his speech during the press conference as the central bank keeps rates on hold. Our resident economics expert Forex Gump has an interesting take on what to expect for the upcoming FOMC statement, so you better read up!

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Dollar domination! Thanks to the slightly upbeat FOMC’s statement, the dollar was able to stage a magnificent rally versus all other major currencies yesterday. The U.S. dollar index, which tracks the performance of the dollar versus a basket of currencies, rose to 75.30 from 75.03.

The FOMC statement came in with some surprises. It said that while growth was weaker than expected, it would probably pick up in the upcoming months. Inflation wasn’t described as “subdued” anymore, which the market saw as slightly hawkish. But most important of all, the FOMC statement did not show any signs that there would be another round of quantitative easing from the Federal Reserve.

Today, there are two important events on the forex calendar to keep an eye out for. The first one is the release of the unemployment claims. Scheduled to come out at 12:30 pm GMT, it is expected to print a 414,000 number, similar to last week’s figure.

The second one is the new home sales report. The market predicts that the annualized number of new home sales fell in May 311,000 from 323,000 in April. Normally, better-than-expected figures provide support for the domestic currency. Let’s see how the upcoming reports will affect the dollar’s price action.

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Thanks to risk aversion, which extended its stay in the markets, the Greenback managed to score back-to-back wins. Its only stalemate was against the Swiss franc, as USD/CHF closed right at its .8390 open price. Will the U.S. dollar be able to keep up its winning streak until the end of this week?

It seems that traders are still reeling from the dovish comments they heard from Bernanke during Wednesday’s FOMC statement. Forex Gump wrote an excellent coverage of the latest FOMC statement and you should check out what Big Ben and his boys had to say!

What kept risk-taking at bay for yet another day (oh hey, that rhymes!) was the poor data released from all over the globe yesterday. Check out the economic calendar and you’d notice that most of the numbers are in the red, implying that those figures came in worse than consensus. Among these were the services and manufacturing PMI from France and Germany, two of the biggest euro zone economies.

Aside from that, U.S. jobless claims also came in weaker than expected. The number of first-time jobless claims for last week stood at 429,000, which was more than the projected 414,000 figure. What’s worse is that the previous week’s figure was revised to show 420,000 in initial unemployment claims, up from the originally reported 414,000 figure. It looks like Bernanke was really serious when he said that the U.S. jobs market is in a bad slump!

On a brighter note, U.S. new home sales came in stronger than expected as it posted a 319,000 increase for May. Aside from that, the figure for April was revised upwards to show a 326,000 rise in sales of new homes.

Keep an eye out for the May durable goods orders report due 12:30 pm GMT today. This report could show that the headline figure rebounded by 1.6% while core durable goods orders increased by 1.0%. If the actual figures meet expectations, these would be significant improvements over the huge declines seen last April. Be careful when trading the news!

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Score another one for the dollar! It had an easy time extending its gains last Friday as risk aversion and positive U.S. data boosted it up the charts. But how will it fare this week?

With concerns about Greece still fresh on everyone’s mind, the dollar basked in the limelight once again. Of course, it also helped that the U.S.’s releases last Friday weren’t as gloom-and-doom as they had been in the past few weeks!

For one, durable goods orders in May rose more than expected. It posted a growth of1.9%, besting the consensus forecast which called for a 1.6% increase after April’s 2.7% drop. From here on out, we could see manufacturing numbers improve as the temporary factors that bogged down growth (high oil prices, Japan’s earthquake-caused slump) fade.

Also, I suppose some investors were relieved to see the final GDP fall in line with the 1.9% forecasted growth. Yeah, that number definitely isn’t anything to be proud of since confirms that growth in the U.S. is indeed slowing. But it isn’t so bad considering the bearish FOMC minutes that were released just a couple days before set expectations very low.

This week, we’ve got a few tier 2 reports coming out way.

Starting things off, we have the core PCE price index and personal spending data due at 12:30 pm GMT. The core PCE price index, which is slated to deal a reading of 0.2% again, is the Fed’s inflation index of choice, so it’d be a good idea to keep tabs on this report. On the other hand, personal spending growth is expected to tick lower, from 0.4% to 0.2% in May.

Later in the week, the CB consumer confidence, pending home sales, unemployment claims, and ISM manufacturing reports will come out. Taken individually, these reports probably won’t have that big an impact on the markets. But if they all paint the same picture (i.e. they’re all gloomy), it could be enough to shift market sentiment and move the dollar.

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Risk was on like Donkey Kong! Though there were barely any economic reports released from the U.S. yesterday, the dollar printed mixed results against its major counterparts. It gained on the yen and the franc, which pushed USD/JPY 57 pips higher at 80.90. Meanwhile, it slipped against the high-yielding currencies, with EUR/USD climbing by as much as 67 pips to 1.4280.

With a move like that, it’s likely that traders were focusing in risk appetite! As I mentioned in my yen post, traders are feeling the love for the euro and other high-yielding assets as the Greek Parliamentcomes close to a decision on a new set of austerity measures. The possibility that the new measures will pass Parliament is increasing with each comment from the euro zone officials, so the high-yielding currencies got a breather from the selling yesterday.

If you’re still interested on economic news though, you should know that the core PCE index in the U.S. inched up by 0.3% in May from only growing by 0.2% in April. Meanwhile, personal spending and income on the same month stagnated.

Perhaps we’ll have more exciting dollar moves today as a bunch of economic reports will be released from the U.S.

First up, the S&P home price index at 1:00 pm GMT might move the markets, especially since the Fed has also been worrying about the state of home sales in the U.S. Then, at 2:00 pm GMT we’ll also see the CB consumer confidence report, which isn’t expected to move from its 60.8 index reading in May. Lastly, we’ll also get hold of the Richmond manufacturing index around the same time.

Stay sharp on your trades today!

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Risk appetite up, dollar appetite down! Except against the yen, the dollar was sold off against all its major counterparts during yesterday’s trading. Are we witnessing a momentous shift in risk sentiment?

First things first, what makes me so sure that the dollar’s weakness yesterday was caused by improved risk appetite? Well, if you had read the School of Pipsology’s lesson on the correlations between stocks and forex, you’d know that USD/JPY moves hand in hand with stocks. And yesterday, both U.S. stocks and USD/JPY rallied!

Aside from that, I’m sure you know pretty well by now that higher-yielding currencies such as the comdolls tend to rally in times of risk taking.

As for yesterday’s economic releases, well, they weren’t exactly impressive themselves. The S&P home price index fell 4.0% year-on-year in April, which isn’t what you’d like to see after March’s 3.8% drop.

Similarly, the CB consumer confidence report disappointed when it revealed that the index printed a reading of 58.5 and fell below the consensus forecast of 60.8 and the previous month’s reading of 61.7.

The only report due today is the pending home sales report for May. Survey says it’ll probably show a 2.4% rise following April’s jaw-dropping 11.6% drop.

Also, keep in mind that members of the Greek Parliament are supposed to vote on the austerity package today. That being the case, we could see a big improvement in risk appetite if they decide to pass the package.

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Bon voyage monsieur dollar! Once again, the dollar got kicked to the curb, as traders put their money in higher yielding assets. The comdolls all slashed and burned, as they all posted significant gains versus the dollar. Meanwhile, EUR/USD rose a solid 65 pips to end the day at 1.4429.

It turns out that many markets participant were correct, as the Greek Parliament did pass the new austerity package. The market had been pricing this in, which is why higher yielding currencies had rallied against the dollar even before the release of the decision.

Now that it seems very likely that Greece will be handed more bailout money, it may be time to focus in on the U.S and it’s debt ceiling problem. Currently, the country has reached its borrowing limit and now needs Washington’s permission to increase the limit. Of course, this isn’t going down quietly as some lawmakers refuse to budge.

The problem is if they don’t raise the ceiling, there’s a good chance that Uncle Sam may default on its debt. I feel this could be a pressing issue over the next couple of weeks and we may see the dollar have trouble making any headway against its major counterparts.

In other news, pending home sales rose by 8.2% in the month of May, way better than the anticipated 2.4% increase, and a very nice improvement from the revised 11.3% decrease the month before. Still, this failed to push the dollar higher, highlighting the weakness of the dollar.

For today, we’ve got weekly jobless claims data and the Chicago PMI report coming out at 12:30 pm GMT and 1:45 pm GMT respectively. Jobless claims are projected to print at 419,000, which would be in line with recent weeks. Meanwhile, the Chicago PMI is expected to come in at 54.1, slightly lower than May’s figure of 56.6. If these reports come in much worse than expected, don’t be surprised to see yet another dollar sell off during the U.S. session.

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The dollar ain’t no DJ, but sure did throw in a good MIX yesterday – a good MIX of figures in its scorecard that is! Ha! USD/CHF ended the day 56 pips higher .8407. However, it lost 72 pips against the euro when the pair closed at 1.4502.

Aside from risk appetite spurred by renewed hope for Greece, the mixed roster of economic reports that we saw from the U.S. must have also kept the dollar from getting its groove on against its higher-yielding counterparts.

While the Chicago PMI for June topped the 54.1 forecast when it printed at 61.1, the unemployment claims report for last week showed that more people filed for unemployment benefits at 428,000 when the market only braced for 419,000.

So aside from gauging market sentiment, make sure you also keep tabs on the economic data listed on our forex calendar for today!

At 1:55 pm GMT, we’ll have the University of Michigan Consumer Sentiment report for June. It is expected to come in at 72.0, which is slightly higher than the 71.8 reading we saw in May.

Then at 2:00 pm GMT, June’s ISM manufacturing PMI will be released. A figure higher than the predicted 51.9 reading will probably be bullish for the dollar so be on your toes! Along with that, the third-tier construction spending report that will also be released and it is expected to show a 0.1% uptick.

Lastly, keep in mind that June is officially over and so is the Fed’s QE2 program. Well, kinda. Take note that the central bank will still continue to provide extra liquidity in the markets by reinvesting payments on maturing securities. But perhaps the conclusion of QE2 would somehow boost the dollar. After all, that takes the Fed one step closer to tightening monetary policy.

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And the losing streak continues! Once again, the dollar found itself with the short end of the forex trading stick, as investors continued to park their money in higher yielding currencies. EUR/USD made it clean sweep, as it rose 26 pips to finish at 1.4528 while GBP/USD recovered its losses from the day before to end 22 pips higher at 1.6071.

Not even good economic data could boost the dollar to regain some of its losses over the week. The revised University of Michigan consumer sentiment index printed at 71.5, just off the expected 72.0 figure.

Meanwhile, the ISM manufacturing PMI came in at 55.3, much higher than the anticipated 51.9 score. However, while this was a nice improvement from last month’s drastic drop from 60.4 to 53.5, it failed to give the dollar bulls any momentum to finish the week on a happier note.

Today is July 4, meaning that U.S. traders will be off celebrating Uncle Sam’s birthday, so I don’t expect to see much movement in the markets. Still, be wary of the thin liquidity as even the slightest move may become exaggerated.

Looking ahead, we’ve got the big mama of all economic reports coming out on Friday, the NFP employment report! Expectations are that 87,000 jobs were added to the economy last month. This would be a small improvement over the June report and nowhere near where the U.S. government would want it to be. If the markets are indeed bearish on the state of the labor market, we could see more dollar selling as traders establish their short dollar positions.

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Boooring! The dollar didn’t really own the charts like fireworks on the fourth of July in yesterday’s trading. It lost 7 pips to the yen when USD/JPY ended the day at 80.80 and 2 pips to the euro when EUR/USD closed at 1.4533.

Hmm, I wonder if the dollar’s performance would be any better today given that most U.S. traders are back to their desks now that the long weekend is over.

The only report we have on tap from the U.S. is the factory orders report for May at 2:00 pm GMT. It is expected to show that purchase orders received by manufacturers during the month increased by 1.1% after falling 1.2% the month prior.

A better-than-expected figure would probably be bullish for the currency as this would be indicative of future production. So watch out! Oh and make sure you also keep an ear out for talks about the U.S. debt ceiling. Be wary of talks that hint further delay in raising the debt ceiling as this would probably take a toll on the dollar.

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Thanks to the slight case of risk aversion in the markets yesterday, the U.S. dollar was able to post some solid gains. As usual, the source of risk aversion was disappointing news and data from euro zone. The U.S. dollar index which measures the performance of the U.S. dollar using a basket of other major currencies rose to 75.01 from 74.71.

Speaking of disappointing data, the only report from the U.S. also failed to meet expectations. The report on factory printed only a 0.8% gain instead of the 1.1% increase initially predicted.

Today, U.S.’ forex calendar will be light again as only the ISM manufacturing PMI is due. Scheduled to come out at 2:00 pm GMT, it is anticipated to show reading of 53.9, which is slightly lower than the 54.6 number seen last month. Given how risk sentiment has been driving the price action of currencies, a weaker-than-expected figure could actually end up being beneficial for the dollar.

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Greenback: thine name is victory! Due to the overall pessimistic sentiment of the market, the safe haven dollar, along with the yen, was able to dominate the charts yesterday. By the end of the U.S. trading session, the dollar was able to post a decent 66-pip gain over the pound and an impressive 114-pip win over the euro.

The source of risk aversion, as I mentioned yesterday, was none other than euro zone. Apparently, Moody’s, a global credit rating agency, downgraded Portugal’s credit rating to “junk” status. China also hiked interest rates by 25 basis points, the third for this years. Chinese rate hikes typically raise concern among investors as they believe it could have a negative effect on global growth.

The worse-than-expected ISM non-manufacturing PMI didn’t help market sentiment either. It printed a reading of 53.3, lower than both forecast and the previous month’s reading.

Today will be a big day for the dollar as the ADP’s version of the non-farm payrolls is scheduled to come out at 12:15 pm GMT. The market expects the report to show a 67,000 gain. I’d keep a close on this if I were you. Traders consider the report as a leading indicator of the employment release on Friday.

Following shortly at 12:30 pm GMT is the weekly initial jobless claims report. Initial jobless claims are predicted to have fallen to 421,000 from 428,000 last week.

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My, oh my, how the fates have turned for the Greenback! Yesterday the currency bulls did a 180-degree turn on the dollar when traders ditched the safe-haven for high-yielding paper. The dollar lost heavily against the comdolls and EUR/USD climbed by 44 pips to 1.4353. What gives?

Apparently, the positive economic reports from the U.S. and a general wave of risk aversion in markets is to blame for the dollar’s slide in the charts. Aside from the ECB raising its interest rates to 1.50%, the U.S. also popped out surprisingly strong employment data. The ADP report printed at 157,000 in June, which is way better than the expected 36,000 figure in May. Meanwhile, the initial jobless claims also dropped to 418,000 from last week’s 432,000.

Let’s see if the dollar bears can score a back-to-back on the Greenback (hey it rhymes!) today when the huge NFP report is released at 12:30 pm GMT. Traders are expecting the data to tick higher after the positive ADP report, but make sure you watch your trades closely in case a surprise comes our way!

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What a wild Friday! As expected, the release of the non-farm payrolls resulted a significant impact on the foreign exchange markets. Right after the release of the report, the dollar was sold-off across the board. The sell-off turned out to be temporary only though, as the dollar was able to regain all of its losses in the next couple of hours. By the end of the U.S. trading session, EUR/USD was trading at 1.4260, 94 pips lower from the day open price.

The NFP report, which was initially expected to print a 97,000 gain, only showed an 18,000 increase. The previous month’s figure was also revised down to 25,000 from 54,000. The unemployment rate figure also disappointed. It came in at 9.2%, higher than the 9.1% forecast.

if you think all the volatility is over, think again! This week, the U.S. economic calendar presents a lot of possible news events to trade.

The first important report on the docket is the U.S. trade balance. Scheduled to be released at 12:30 pm GMT on Tuesday, the trade balance is expected to show that the trade deficit has gone down to 44.1 billion USD from 44.6 billion USD.

Then, at 6:00 pm GMT, the FOMC will publish the minutes of its latest interest rate decision meeting.

On Thursday, at exactly 12:30 pm GMT, you’ll be treated again to a plethora of economic data. Watch out for the release of the retail sales report, the producer price index, and the weekly unemployment claims.

On Friday, the U.S. consumer price index and the preliminary University of Michigan consumer sentiment survey will come out. The consumer price index, which will print at 12:30 pm GMT, is slated to show a 0.2% gain. Meanwhile, the consumer sentiment survey which will come out an hour and a half later is predicted to show a reading of 72.5.

There are a lot of data folks, so be extra careful on holding your trades for too long! Good luck trading!

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The dollar’s price action yesterday was as mixed as Happy Pip’s drinks when traders played the classic game of risk aversion. The dollar gained on the high-yielding currencies, which dragged EUR/USD 230 pips lower to 1.4013 and GBP/USD 131 pips down to 1.5900. Meanwhile, the Greenback lost against the other safe-haven currencies, which is evidenced by USD/JPY’s 31-pip fall to 80.31 and USD/CHF’s 12-pip slip to .8358.

Though no economic reports came out from the U.S. yesterday, the traders were rocked by fresh debt contagion concerns in the euro zone. Apparently, Italy is now in trouble too, which would spell an even bigger trouble for the financial markets IF it defaults on its debts. As it is, the euro zone peeps are now scrambling to calm the markets by trying to find a solution.

Over in the U.S. today we’ll see the trade balance report come out at 12:30 pm GMT, followed by the IBD/TIPP economic optimism report at 2:00 pm GMT and the FOMC meeting minutes report at 6:00 pm GMT. Though the markets’ attention seem to be focused on the euro area right now, it might be safe to also pay attention to any changes in the Fed’s statements and how the traders will react to it.

Good luck in your trades today!

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Uh oh. The dollar scored more losses than wins in yesterday’s trading no thanks to talks about the possibility of QE3.While it posted gains against the euro, Aussie and Kiwi, it gave up a handful of pips to the Swissy, yen, pound and Loonie.

Yeah, you read that right. QE3. The FOMC minutes showed that some policymakers were open to the idea of providing the economy with more stimulus. Consequently, this got naysayers talking about another quantitative easing package.

Keep in mind that the meeting happened even before the disappointing employment report last week. I wonder what FOMC would have to say about that in their next meet-up.

Anyway, yesterday’s reports probably weighed the dollar down even further.

The trade balance report for May showed that imports outpaced exports by 50.2 billion USD and disappointed the market consensus which was for a narrower trade deficit of 44.1 billion USD. On top of that, the IBD economic optimism report showed that U.S. consumers don’t seem upbeat about their economic outlook with the index down to 41.4 in July after coming in at 44.6 the month prior. The forecast was at 45.7.

Today, we have Fed Chairman Ben Bernanke’s speech at Capitol Hill to look forward to. The head honcho of the central bank will probably get grilled with questions on job growth and the prospect of more stimulus so keep an ear out for what he has to say. If he talks with a dovish tone at 2:00 pm GMT, we may just see the dollar give up more ground to its counterparts.

Also on tap later at 12:30 pm GMT is the import prices report for June which is eyed at -0.7%. Then at 6:00 pm GMT, we’ll get dibs on the Federal budget balance. It is expected to show a 68 billion USD deficit.

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And so, the dollar’s run of daily wins finally came to an end. The U.S. dollar index, after climbing to its highest level this month at 77.17, fell to 75.65 yesterday and marked its first significant loss in more than a week.

The losses, as it seemed, was primarily the result of Mr. Ben Bernanke’s testimony in front of the U.S. congress. Bernanke said that while growth has been modest, the Federal Reserve expects the economy to continue to improve during the third and fourth quarters. Still, the central bank is ready to make changes to monetary policy (i.e., engage in more quantitative easing) if growth remains weak.

Today, focus will turn to economic data.

At 12:30 pm GMT, the U.S. is scheduled to release a couple of important economic reports: the producer price index, the retail sales report, and the initial jobless claims.

The producer price index, which measures the average change in price of finish goods and services sold by producers, is expected to show a -0.2% rise.

Meanwhile, the retail sales report is predicted to print a 0.1% decline. The core version of the report which excludes volatile items such as automobiles is slated to show a 0.1% increase.

Lastly, the initial jobless claims are expected to have fallen to 413,000 from 418,000 seen the previous week.

Since Bernanke indicated that the bank would keep a close eye on growth, figures that fail to meet expectations could be seen by the market as negative for the economic growth outlook and therefore negative for the dollar. Be careful out there!

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With Bernanke throwing a curveball with his statements and the U.S. data printing mixed results, it’s no wonder the dollar bulls and bears were in a frenzy! The Greenback ended the day mixed against its major counterparts with USD/JPY inching 16 pips to 79.15 while GBP/USD gained 34 pips at 1.6138.

If you’ve been watching the U.S. economic reports, you would’ve seen how the retail sales figure showed a slight improvement in June while the core data stagnated at 0.0%. Meanwhile, the initial jobless claims also progressed, falling to 405,000 last week from an upwardly revised 427,000 last week. Lastly, the PPI headline figure dropped by 0.4% in June with its core figure inching 0.3% higher in th e month.

As much as the reports provided insight to the U.S. economy, all attention was once again on Fed Chairman Ben Bernanke as he faced the Senate yesterday. In his statement, he clarified that while the Fed is open to more economic stimulus, it doesn’t necessarily mean that they’re drafting a proposal now. The not-so-bearish statement gave relief to the dollar bulls, which boosted the Greenback against some of its counterparts.

Today the CPI data is scheduled for release at 12:30 pm GMT, followed by the Empire State manufacturing index around the same time. The CPI data is expected to slip a bit and the manufacturing index is seen to improve, but keep close tabs for any surprises, will ya?

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The US Dollar has shown some weakness in response to the ongoing govenment debt ceiling concerns and faltering recovery. What forcess will prevail, and waht is the meadium term outlook for the US Dollar?

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What a wild week for the U.S. dollar, eh? Talks of QE3 and the looming deadline for their debt ceiling pushed the dollar this way and that last week, bringing the USDX closer to the 75.00 handle. Will the dollar lie low this week or will it be in for another topsy turvy ride?

But first, let’s take a quick look back at the U.S. data released last Friday. Based on those reports, it looks like the U.S. is still in deep trouble as almost all the figures came in the red. Their CPI figure for June showed a 0.2% drop, twice as much as the predicted 0.1% decrease. The Empire State manufacturing index, which was expected to improve from -7.8 to 4.5, fell short and landed at -3.8 this July. Industrial production also fell short as it showed a mere 0.2% uptick, less than the expected 0.4% increase. Lastly, consumer sentiment took a huge hit as it slid from 71.5 to 63.8 instead of rising to 72.5 in July.

Phew! That’s a lot of negative data! Only the U.S. core CPI came in better than expected as it showed a 0.3% increase for June, a notch higher than the predicted 0.2% reading.

This week, the U.S. economic calendar isn’t so busy, which means that traders’ attention will probably shift to the state of U.S. debt. As my buddy Forex Gump pointed out in his article about the U.S. debt ceiling last week, the deadline set by credit rating agency Fitch is fast approaching and the U.S. might just get slapped with a downgrade if their lawmakers don’t get their act together soon.

For today, only the TIC long-term purchases report is on deck and this could show that purchases of U.S. securities rose from 30.6 billion USD to 48.4 billion USD in May. A higher than expected figure could show that demand for the U.S. dollar remained strong during the month, which could convince investors to buy up the currency even more. Of course, I’d stay tuned to updates regarding U.S. debt and the possibility of QE3 if I were you!