Daily Economic Commentary: United States

Daily Economic Round Up of data from the United States!

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The USD started the week by garnering some gains as China reaffirmed the reserve status of the USD. People�s Bank of China Governor Zhou Xiaochuan said that China�s foreign exchange reserve policy is quite stable and that they do not to diversify out of their USD-denominated assets for the time being. Risk appetite began to take effect in the middle of the day, causing the USD to weaken against the EUR, AUD, and NZD.

Major economic reports due today could spark another run of risk tolerance. Chicago PMI, which is due at 9:45am GMT, is projected to rise from 34.9 to 38.9. Consumer confidence is also expecting an uptick, possibly from 54.9 to 55.4. The actual figure is due at 10:00am GMT. Housing price index is expected to post another 18.7% year-on-year decline.

Consumers are starting to realize that things are not as rosy as they seem. The consumer confidence index slid from 54.8 to 49.3 instead of rising to 55.4 as expected. Concerns about job losses and wage cuts took their toll on the consumers� outlook for the economy. Prior to this, house prices reported an 18.1% drop, which is less than the forecasted 18.7% decline. Chicago PMI soared from 34.9 to 39.9, higher than the consensus at 38.9. Nonetheless, a wave of risk aversion took over the charts as the USD ended higher against most major currencies.

US jumpstarts the first of July with a bunch of economic reports due, starting with the non-farm employment report. This measures the estimated change in the number of people employed during the previous month and is a market-moving economic report. Price moves can reach as much as 200 pips upon the release of this report so watch out! The consensus is a 388K decrease in employment, which is better than the previous 532K decline. This is due at 8:15am GMT.

Next up at 10:00am GMT is the ISM manufacturing PMI, another market-moving report. This is an index obtained through a survey of manufacturers asked to rate the relative level of business conditions. The index is projected to inch closer to the 50.0 expansion mark. An improvement from 42.8 to 44.5 is expected. Pending home sales are also due at 10:00am GMT. An increase of 0.7% in May is expected to follow April�s 6.7% increase in pending home sales. Would we see another wave of risk aversion if the numbers disappoint?

The USD traded in a mixed tone across the boards as risk appetite popped its ugly face (or pretty face, depending on what your point of view is) on the foreign exchange market yesterday. It posted large losses versus the CHF, CAD and the EUR but remained pretty much range bound versus the other majors. Still, the bias among investors was to sell the currency.

It looks like China was once again to blame for the USD�s demise. Apparently, Chinese factory data showed that its manufacturing industry has slightly picked up, indicating that the recession�s grip on the world is easing. In addition, China made comments again to talk about a new world reserve currency on the next G8 meeting. China With more than 800 billion USD in US bonds, China seems to be playing both sides of the fence! Economists and investors seem to suggest that the dollar may further extend its losses versus most major currencies, at least in the short-term.

US�s economic bag likewise showed mixed results. For one, the ADP non-farm employment change showed that 473,000 people lost jobs last month, much more than the 338,000 lost jobs initially expected. Despite this, May�s figure was revised up to -485,000 from -532,000. The ISM manufacturing PMI for May, on the other hand, improved to 44.8. The reading was higher than the expected reading of 44.5 and April�s 42.8. Still, the figure is still lower than baseline 50, indicating that the manufacturing industry is still in contraction mode. Lastly, pending home sales for May slightly increased by 0.1%, lower than the 0.7% rise anticipated.

All eyes will be on the US non-farm employment change today! Dubbed as the mother lode of all economic reports, it�s due for release a day earlier because of Independence Day celebrations. Expect to see it at 12:30 pm GMT. Economists are expecting 360,000 lost jobs, signifying that labor conditions remain weak. US unemployment probably hit 9.6% in June, up from 9.4% in May. Because of this, the report on unemployment claims would probably take a back seat for now. In any case, the forecast is that 612,000 individuals claimed insurance for the first time last week.

Surprise, surprise! The dollar rallied late during the US session on increased risk aversion as the Non-Farm Payroll Employment report�s results were worse than expected.

The report showed that 467,000 jobs were lost in June, much higher than the forecasted figure of 322,000. This came one day after a similar report by the ADP also had worse than expected results. This was discouraging news, as job losses fell to a revised 322,000 in May. Prior to that, monthly releases had shown job losses figures above 500,000. The unemployment rate now stands at 9.5% and is expected to hit 10% by the end of the year.

Other labor data showed that weekly unemployment claims fell to 614,000 last week, which was in line with forecasts, while average hourly wage remained steady from May to June. With labor conditions still looking bleak, this cause risk aversion to rise yesterday as stocks fell and the dollar rallied.

In other news, the US Factory Orders report showed some positive data, as orders rose by 1.2% in May, higher than the expected rise of 0.9%. This came after a downwardly revised 0.5% rise in April, the third time in 4 months that orders rose. It also marked the strongest rise since June 2008. This may be a signal that the contraction in the manufacturing industry may be starting to stabilizing. It will be interesting to see whether orders will continue to pick up, or if companies still have room to cut inventories, which would limit more orders.

Lastly, a day after Chinese officials mentioned that they will bring up the topic of a �new world currency� in the next G8 meeting, China�s Vice Foreign Minister expressed confidence in the dollar by saying that the USD is the main global reserve currency. China Vice Foreign Minister He said that he hasn�t heard any news from other Chinese officials regarding a push for a new reserve currency and said that he hopes the USD remains stable. Another set of fickle comments coming from the Chinese front.

Today is a banking holiday, as the US enters the Fourth of July weekend. Enjoy the long weekend and be careful playing with those fireworks!

Welcome back! How was your 4th of July? Well, the USD also took an Independence Day holiday from its strong rally last week as the EUR and commodity currencies staged a modest recovery. The week ahead promises to be relatively light - in terms of economic data, that is. Major economic data in store for the US include ISM non-manufacturing PMI due today and trade balance data due on Friday.

A slight improvement is expected from the US non-manufacturing PMI as analysts project an increase from 44.0 in May to 45.9 in June. If the actual figure due at 3:00pm GMT today hits the mark, then we could see a USD sell-off when risk tolerance makes its way back into the market. Otherwise, expect risk aversion to keep fueling the USD rally.

The G8 summit this week could also bring some volatility to the table since talks of diversification continue to threaten the USD. On the other hand, G8 leaders could shift their focus to discussing the current state of the global economy and potential challenges to recovery. European leaders appear to be uninterested in talking down the USD since this would lead to an appreciation of the EUR, thus hurting the region’s exports.

Risk aversion could still be the game plan for the week as traders are still wallowing in the aftermath of last week’s disappointing NFP report. Also, in light of the recent drop in consumer confidence, PMI data could catch on the pessimistic outlook. This week’s light economic data provides very little chances to revive hopes for a recovery in the US economy.

The USD was still a little tipsy as it lost its footing against most of the other majors yesterday. If its any consolation, it found itself at the positive end versus the GBP.

The ISM non-manufacturing PMI surprisingly rose to 47.0 from a 44.0 reading last period. The account was only expected to increase marginally to 45.9. The index assesses the business conditions of the non-manufacturing sector (service, retail, etc) in the US. The recent reading marks its highest level since September 2008. A score below 50.0 still indicates that conditions are below par. The improvement, however, suggests that the US service sector at least is on its way to recovery.

No economic reports are due today in the US. The USD might just look for leads from the other currencies regarding its short term movement.

The currency big dog � the USD � flexed its muscles versus most major currencies yesterday. It looks like all those previous talks about �green shoots� and �things being less bad� have now turned into nothing but distant memories. Risk aversion is at high levels and if bad economic data continue to pop up… Well, further USD strength might be in the cards, at least in the short term!

Today marks the beginning of the G8 meetings. Strictly speaking, the G8 meetings aren�t exactly aimed to talk about the financial crisis. They are more focused on dealing with trade protectionism and raising capital and boosting agricultural investment in emerging nations. Still, it would be prudent to keep an ear out on the meetings as any change in sentiment could cause some waves on the USD value.

The only economic data due for today is the report on consumer credit for the month of June at 7 pm GMT. Consumer credit tends to have a positive correlation with consumer spending because the generally, when consumer borrow more, they spend more. Economists expect that outstanding consumer credit that requires installment payments dropped by 9.8 billion USD.

Well, that�s about it for today for the US… Happy trading!

Risk aversion is back! The dollar got boosted yesterday as risk sentiment shifted towards safety. This boded well for the US dollar, as it gained against all majors… well almost all. The USD fell dramatically against the yen, as investors chose to move their investments to the yen. The USDJPY pair fell by over 200 pips and reached its lowest level since last February! Interesting � could the dollar be relegated to secondary status in terms of �safety�?

Not much high impact reports came out from the US yesterday, with only the Crude Oil Inventories and Consumer Credit m/m reports being released. The first report showed the oil inventory levels rose last week by 767,000 barrels. Reports also showed that oil prices fell to 61.37 USD per barrel, the 6th consecutive day that oil prices fell. This may help the USD gain against the Loonie, as it has been on an upward channel as of late.

The second report (Consumer Credit m/m) indicated that consumer credit fell for the 4th straight month in May, as it has fallen by 1.54% on an annualized rate. With unemployment rising and credit being accessible, will we more people file for unemployment benefits in the short term?

US Fed member Charles Evans said yesterday that the recession should be done by the end of this year, and that he sees no reason for the Fed to expand its asset purchase program. He said that he viewed the Fed to be in a �wait-and-see� mode. This statement downplays speculation that the Fed may expand its quantitative easing measures to help boost the economy further. Of course, if we see that things are not improving or are worsening, speculation may rise again.

Today doesn�t bring any high impact news, except for the unemployment claims report - which comes out at 12:30 pm GMT. It can sometimes cause volatility when it comes out way off expectations. Claims are expected to top 600,000 once again. Also today, FOMC members Elizabeth Duke and Donald Kahn will be speaking at separate events. Look out for potential statements about monetary policy, much like what Charles Evans said yesterday.

Tomorrow, we could see more volatility as the Trade Balance report is due for release at 12:30 pm GMT. The report is expected to show that the US has a trade deficit of $30 billion. Also due tomorrow are the Preliminary University of Michigan reports (Consumer Sentiment and Inflation Expectations) at 1:55 pm GMT. Lastly, Treasury Secretary Tim Geithner will be speaking before the House Committee on Financial Services at 2:00 pm GMT.

Also, the G8 Meetings will come to a conclusion tomorrow. With it being a Friday, we could see strong moves in the markets depending on what is said at the conference.

Reversal or correction? For the first half of the week, we watched risk aversion exert its dominance in the currency market, causing investors to flock to the safe-haven USD. Yesterday, better-than-expected jobless claims report coaxed investors back to risk tolerance mode.

This week’s unemployment claims came in at 565K, which is below the consensus at 608K. Last week’s jobless claims were at 617K. Now now, let’s not chalk this up as a recovery in the labor market just yet. This data is distorted by seasonal auto plant closings and is offset by a large increase in continuing claims, which jumped to a record high. The surge in continuing jobless claims from 159K to 6,883K seems to be a better gauge of actual labor conditions.

In other US economic news, wholesale inventories slid by 0.8%, which is less than the projected 1% decrease. Although a fall in stockpiles indicates an uptick in sales, the current reading indicates that the pace of inventory reduction and sales is slowing down.

Heads up for the trade balance data due today! The US trade deficit is expected to widen from 29.2 billion to 30.0 billion USD as exports continue to plummet. The actual figure will be released at 1:30pm GMT.

Also, University of Michigan is set to report a marginal improvement in consumer sentiment. The index, which is expected to step up from 70.8 to 70.9, is due at 2:55pm GMT. Note that the actual figure could disappoint, bearing in mind that the Conference Board previously reported a surprise drop in consumer confidence for June.

Lastly, the conclusion of the G8 summit today could provide lingering event risk as sentiment-shifting commentaries from G8 leaders could leak out. Stay on your toes!

The USD knocked the hell out of the other heavyweight currencies except the JPY in Last Friday�s �match�. Market participants regained their confidence in the market last Thursday. The USD weakened as a result as they switch back to higher yielding assets like the AUD and the EUR. Their optimism, however, faltered once again which gave support to the USD.

The US� trade balance in May was due last Friday. The USD gained ground ahead of the report in anticipation that its trade deficit would balloon to -$30 billion from -$28.8 billion. Trade balance measures the difference US� exports and imports. A trade deficit (negative trade balance) means that imports exceed exports. Instead of widening, its trade balance surprisingly came in at -$26 billion. The USD�s gain was shortly reversed.

The preliminary result of the University of Michigan consumer sentiment survey was also reported. The index is based on about 500 consumer surveys regarding the relative level of current and future economic conditions. The account came in at 64.6, well below the expected 70.9 reading after registering a score of 70.8 during the month prior. The USD headed north following the report.

Today (6:00 pm GMT), the US Federal budget balance will be announced. Market participants expect the US budget deficit to narrow to -$65.5 billion from a high of -$189.7 billion. A lower deficit could mean that government spending would also lessen. However, such could be seen positively (for the USD) given the US� surging debts.

The USD generally lost ground against most major currencies yesterday as money flowed back in the foreign exchange markets. Given the way the USD failed to extend its gains from last Friday, it seems that the currency�s direction is still uncertain. Risk tolerance is shaky at best, and it looks like it�s all a matter of picking which major currency is the strongest… Or, to be more accurate, least weak. With this week�s relatively light economic calendar, we might just see more range bound movement as we get deeper into the summer doldrums!

Today, US�s economic bag is packed. Later afternoon at 12.30 pm, we will see the numbers on US [retail sales](Retail Sales Definition | Forex Glossary by BabyPips.com), both headline and core. The headline report is expected to print a 0.4% increase while the core retail sales, which excludes highly volatile items such as automobiles, is predicted to show a 0.5% rise. Also release at the same time is the US produce price index for June. The PPI basically records the monthly change in price of finished goods and services sold by businesses. The consensus is a 0.9% increase. Finally, at 2 pm, we will see the report on business inventories for May.

Lots of reports due today but nothing ground breaking so the USD would probably trade sideways versus most currencies with a bit of volatility spikes here and there. Still, like I always say… You never know with the markets today so be careful for any risk sentiment shifts or surprise news!

We saw some mixed trading yesterday for the USD. In general, it fell against most majors, most notably against commodity currencies, as traders pounced on headline news from the US. Could this signal a shift in risk assessment? Or will the recent consolidation continue to persist?

Retail sales rose last June by 0.6% from the last month, which was the largest rise this year. In addition, the PPI report showed that prices paid to producers rose 1.8% in the same period, double the expected 0.9% rise. Yet, these numbers are a little deceiving, as the large rise was mostly due to rising gasoline costs and an increase in automobile sales. Take these two items out, and retail sales actually fell for the 4th consecutive month. It seems like traders are just jumping on anything that signals �recovery� without looking at the underlying data.

In other news, a report showed that US business inventories are continuing to fall. Last May, inventories fell by 1.0%, which is in line with expectations. Companies have been forced to cut inventory levels during this recession in order to adjust to demand.

Later today, a slew of economic reports are scheduled for release. One of the reports to watch out for is the CPI m/m report. Have traders already acted on inflation data (PPI) that came out yesterday? Other reports to take note of are the Empire State Manufacturing Index (12:30 pm GMT) and Industrial Production m/m (2:30 pm GMT) reports. Also, the minutes of the last FOMC meeting are due at 6:00 pm GMT.

Tomorrow, we have the weekly unemployment claims (12:30 pm GMT), which is expected to fall below 600,000 for the second consecutive week. Also scheduled for release are the TIC Long-Term Purchases and Philly Fed Manufacturing Index (which is supposed to be highly correlated to the Empire State version). These reports are due at 1:00 pm and 2:00 pm GMT respectively.

With all the reports coming out, should make for some exciting, volatile trading over the next couple of sessions!

The USD sold off like pancakes at a state fair yesterday, with strong economic data as risk appetite boosters. The rise in consumer prices, improvement in manufacturing, and the uptick in industrial production pushed the USD lower against most currencies, except the JPY.

Price levels rose by 0.7% in June, as indicated by the CPI. Core CPI, which excludes the costs of food and energy, climbed by 0.2%. This indicates that much of the increase in consumer prices could be accounted for by higher energy costs.

The Empire State manufacturing index leapt from -9.4 to -0.6, its highest level in a year. This beat the forecast at -5.3. This index is considered an early indicator of the Institute of Supply Management’s factory survey, which posted a 44.8% uptick in the latest report. Investors are hopeful that the next reading would exceed 50%, which is the threshold for growth.

Positive economic reports just kept coming as capacity utilization rate recorded at 68% increase. This implies that a higher percentage of available resources are being utilized by manufacturers, mines, and utilities. It is also considered a leading indicator of consumer inflation because manufacturers tend to raise prices as they are nearing full capacity.

Industrial production fell less than expected, posting a 0.4% decline instead of the projected 0.6% drop. After sliding down by 1.2% in the previous month, industrial production data in June indicates that the factory slump is gradually easing.

Investors were far too focused on the positive economic reports that they appeared oblivious to the upward revision in the Fed’s unemployment forecasts. From the prior 9.4% forecast, unemployment rate is now expected to hit 9.95%, with a high of 10.5% as the worst case scenario. Nonetheless, the Fed provided comfort to investors as they also made upward revisions for the US GDP. The central bank expects the economy to slow down by 1.25% this year, compared to the previous forecast of a 1.65% contraction.

Heads up for earnings reports due today! JP Morgan, IBM, and Google are scheduled to release their 2nd quarter earnings and these should have a significant impact on equities and currencies. TIC long-term purchases and Philly Fed manufacturing index are also expected this Thursday. And oh, that reminds me! Weekly jobless claims are also on the schedule for today.

Treasury International Capital (TIC) long-term purchases are expected to climb from 11.2 billion USD to 16.7 billion USD, reflecting higher demand for US securities. The Philly Fed manufacturing index, on the other hand, is predicted to slide from -2.2 down to -4.9. Lastly, unemployment claims are projected to be slightly lower than last week’s 565K. Could this mean that we should gear up for another run of risk appetite today?

The USD regained some its losses from yesterday throughout the entire trading session in Asia. Higher yielding currencies such as the EUR, GBP, AUD, quickly made headways and left the USD behind upon the opening of the London market. The USD was mostly choppy during the US session. Despite its effort to pull through, the selling pressure is far greater which led the USD back in the blue once again versus most of the other majors.

The US saw a mixed economic data from the yesterday�s unemployment claims, TIC long-term purchases, and Philadelphia Fed manufacturing index results.

The unemployment claims for the week ending July 11 came in better than expected at 522,000. The number of people who filed for unemployment insurance for the first time during the past week was projected to reach 550,000 during the week after previously registering a 569,000 count. The latest number is its lowest level since January of this year. However, hiring remains to be limited and the US unemployment may still rise over 10% by 2010. Nonetheless, the better-than-expected unemployment results helped boost confidence in the capitals markets.

The net long-term TIC flows in May, however, unexpectedly sunk to -$19.8 billion. The figure was expected to rise to $16.5 billion from the April�s mark of $11.2 billion. The account measures the difference in value between foreign long-term securities purchased by Americans and US long-term securities purchased by foreigners. A negative account means that the total value of foreign issues that Americans bought is larger than the American issues that foreigners purchased. This indicates that the international demand for US assets is slowing. The drop in international demand was caused by the diversification done by Russia, Japan and other countries.

The Philadelphia Fed manufacturing index in also fell further to -7.5. The account was only expected to drop to -4.9 from -2.2. The drop in the figure marks its 10th consecutive monthly contraction. The index measures the manufacturing activities in the US mid-Atlantic region. A negative reading indicates that conditions are worsening.

None of the above economic reports, however, was the key driver yesterday. The main catalysts that boosted the capitals markets up were the better-than-expected earnings reports by the tech giants IBM and Google. JPMorgan Chase also reported better earnings results but it wasn�t able to give support to the financials.

Data on housing starts and building permits for the month of June will be published today at 12:30 pm GMT. The number of new residential building permits issued is expected to come in at 520,000. The number of housing starts is also estimated to reach 530,000 for the period.

Bank of America, Citigroup, and General Electric will report their quarterly earnings today. Much of the attention will be given to them since these giants were the ones that almost collapsed amid the recession. Positive earnings will fuel risk appetite while dismal profits would surely cause a little panic.

When a country�s positive economic data hit the shelves, basic logic would dictate that its domestic currency would appreciate as well. For the USD, This doesn�t necessarily hold true in today�s tough times. The reason? Risk tolerance.

Investors tend to associate good US data with economic recovery. They believe that if US economic data are showing signs of recovery, the rest of the world would soon follow. We saw this last week as corporate earnings printed better-than-expected results, prompting investors do away with the low-yielding USD in favor of relatively higher yielding currencies such as the AUD, EUR and NZD. It only makes sense… the best �bang for your buck� right?

Optimistic headline numbers on housing starts and building permits also kept USD buying to a minimum. The June report on housing starts printed an annualized number of 580,000, much higher than the 530,000 initially predicted. This was also an improvement from last period�s revised up figure of 560,000. Building permits shared the same firm tone. It reported an annualized number of 560,000, better than the 520,000 forecast. Economists see the reports as leading indicators for economic health. It�s like an infectious laughter! The more houses and buildings are built, the more workers and employees are needed to construct them. Furnishings and equipment must also be purchased which, in turn, stimulates demand and production. This puts more money in the pocket of consumers, enabling them to have more money to spend. You get the picture!

Looking ahead, we�ve got a pretty light week for the US with regards to economic data. The only hard market hitting economic due this week will be the report on existing home sales on Thursday. Before that though, we might see quite a bit of volatility tomorrow at 2 pm. Federal Reserve Chairman Ben Bernanke is set to testify before the House of Financial Services Committee in Washington about the Fed�s monetary policy. Bernanke�s talks have the tendency to cause some waves in the FX market so be careful when trading during that time!

And the rally continues! Well… the rally for higher yielding assets that is! Other majors continued their strong moves against the US dollar, as risk appetite continues to persist. Risk tolerance has been boosted as of late due to good news that has been propping up as of late. With US Fed Chairman Ben Bernanke scheduled to speak later today, could this prompt a change in sentiment? Or will it add fuel to the fire?

Only one report was released yesterday, but it appeared that that was all that was needed to help inject more optimism in investors. The CB Leading Index rose by 0.7% in June, better than the expected 0.5% forecast.

Risk sentiment is really driving the markets right now and even a statement of �weak growth� by Fed member Dennis Lockhart could not dampen optimism. Lockhart said that there were many obstacles (labor conditions, healing of the banking system) that would slow down economic recovery and that it would take time to overcome these problems.

With no economic reports coming out today, watch out for the aforementioned speech by Ben Bernanke at 2:00 pm GMT. He will be talking in front of the House Financial Services Committee to give the Fed�s semi-annual monetary policy report. Bernanke could outline the future direction of monetary policy by the Fed. He could also mention a timeline for exiting previously implemented strategies. The report will last until tomorrow, so be on the lookout for any news releases. We may see liquidity dry up as traders will be waiting for the results of the report.

Props to Big Ben! Fed Chairman Ben Bernanke’s speech boosted the USD as he assured that the central bank is prepared with an exit strategy for its quantitative easing and that they are ready to implement it when the right time comes.

Bernanke kept a cautious yet optimistic stance regarding his outlook for the US economy when he said that “tentative signs of stabilization” can be seen. According to him, consumer spending has been relatively stable so far this year and that the decline in housing activity appears to have moderated.

Additionally, he remarked that the central bank’s monetary policy is still focused on fostering economic recovery. If economic conditions indicate that a tightening of the monetary policy is necessary, then the central bank has a number of tools to raise interest rates as needed. He also said that it was time to work towards reducing the nation’s deficit.

Bernanke is scheduled to deliver another speech at 2:00 pm GMT today, this time with the Senate Banking Committee as audience. No sentiment-shifting economic reports are expected from the US today. Only the housing price index, which is due at 2:00 pm GMT, and crude oil inventories, which is set for 2:30 pm GMT, are on tap.

The USD continued to slide yesterday against the other major currencies. Though, the degree of its decline was a bit muted compared to the previous days.

Fed Chairman Bernanke made another testimony before the Senate yesterday. That time, he fought for the independence of the Fed as he wanted to shield the central bank from political intervention. He, however, noted that the Fed should also be responsible for how they are using the taxpayers� money. Another topic that was brought up was about the potential defaults in commercial lending. Some people have suggested that a wave of possible defaults in the commercial lending sector may even dwarf the recent home-mortgage defaults in the US. Bernanke responded by saying that the bank will continue to monitor the sector�s health. It is also open to an extension of the TALF program if the need arises.

Today, the unemployment claims for the week ending July 18 in the US will be released at 12:30 pm GMT. The number is expected to reach 551,000 from the 522,000 mark of the week prior. A weak labor market continues to be the US’ weakest link. An increase in the number could cause a little worry in the market but could be bullish for the USD in the short term.

Data on existing homes sales for the month of June will also be published today at 2:00 pm GMT. The annualized number of existing homes sales for the period is expected to have increased to 4.83 million from 4.77 million. An increase in the number would support investor confidence. It would, however, be bearish for the USD as investors would likely switch to higher yielding assets away from the USD.

Risk hungry investors totally blew the USD out of the water yesterday! Well, in the Euro/US session overlap at least. It managed to retrace some of its losses as the US afternoon session went by. It looks like the sentiment on risk taking isn’t over as more and more economic data show that the global economy is starting to pick up.

And who were the prime suspects in yesterday’s trading session? The jobless claims and existing home sales reports of course! Jobless claims showed that 554,000 people asked for insurance, a bit higher than the 551,000 initially expected. Even if this is the case this is certainly a far cry from the 600,000++ numbers we were so used seeing the previous months before. Existing home sales, on the other hand, printed that 4.89 million (annualized number) homes were sold in June. This was an improvement from the 4.82 million consensus, which is giving more evidence that the general trend in existing home sales is up.

Sentiment is King and if you can capture this, there is a high probability that a huge sum of cash is closely behind. Investors believe that the worst is behind us and the economy has nowhere to go but up! In addition, “less bad” economic data is popping up here and there, which is propping up investors appetite for risk. Notice how the USD has generally lost ground versus most major currencies since early this year. If this kind of sentiment continues, investors could push riskier assets highers and higher, much to the demise of the USD. I guess what I’m saying is… Do not underestimate the power of market sentiment. Even if fundamentals are still shaky, market sentiment could easily overpower it and shove it aside.

In today’s economic slate, the revision on University of Michigan’s July report on consumer sentiment is due for release today at 1:55 pm GMT. Economists are expecting initial reading of 64.6 will be revised up to 65.1. Federal Reserve Chairman Ben Bernanke will be speaking for the third time also later afternoon at 2:30 pm GMT. He’ll be discussing the issue of regulatory restructuring with the Financial Services Committee in Washington DC.

It’s the end of the week and traders will be closing their books for the weekend. Will they end up on the riskier end of the market or will they run back to the safety of the USD and JPY today? I wish I knew for certain too!