Daily Economic Commentary: United States

Trading Discussion News and Economy
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The Greenback was able to smash both the pound and the euro to bits yesterday as investors priced in their bearish expectations on the upcoming central bank interest rate statements. EUR/USD closed the day with a 71-pip loss while GBP/USD suffered a 94-pip defeat.

Apparently, most market participants predict some form of easing from both the European Central Bank (ECB) and the Bank of England (BOE). If you want to know more about the upcoming interest rate statements, just head on over to Forex Gump’s blog. In his latest post, he discusses the market’s forecasts and how they could possibly affect the euro and the pound’s price action.

There are a couple of market-moving events scheduled to happen in the U.S. as well. At 12:15 pm GMT, ADP’s version of the non-farm employment will be released. Since the ADP provides payroll services to many companies in the U.S., the results could give us an idea of how tomorrow’s employment report will come out.

Shortly after, at 12:30 pm GMT, the weekly unemployment claims will be published. It is slated to show that 385,000 people claimed for jobless insurance, which is slightly lower than the previous week’s 386,000.

The last important report due today is the ISM non-manufacturing PMI. It is anticipated to print a reading of 53.1, down from last month’s 53.7.

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Looks like the fireworks came one day later! Thanks to the releases of a slew of reports yesterday, the dollar exploded higher, posting massive gains versus the euro and pound. EUR/USD dropped 147 pips before finishing at 1.2389, while GBP/USD closed 72 pips lower at 1.5524.

Thanks to a rate cut by the ECB and the BOE expanding its asset purchase program, the dollar zoomed higher yesterday. One reason why we saw such strong moves was that U.S. traders were just rolling back into the office after the Fourth of July holiday. They had yet to position themselves ahead of the central bank decisions and once they heard that what the ECB and BOE had to say, they simply double downed and started buying the scrilla.

In other news, we got better-than-expected employment data, as both jobless claims and the ADP report printed in the green.

The ADP non-farm employment change report indicated that 176,000 jobs were added to the economy last month, which was much better than the projected 103,000 figure. This was also a nice improvement from the previous release of 136,000.

Meanwhile, unemployment claims came in at just 374,000, which was a pleasant surprise as we’ve seen the 4-week rolling average stay above the 380,000 level the past five weeks. Of course, one week of data doesn’t make a trend, so we’ll have to keep an eye out on this over the next few weeks.

The one bit of bad news we did see during the New York session was the ISM non-manufacturing PMI. The index failed to hit projections of a reading of 53.1, as it printed as just 52.1. Still, this didn’t deter the dollar bulls from rampaging through the markets.

For those of you who missed all the action yesterday, I’ve got some good news for you! The action continues tonight, as we’ve got the granddaddy of all economic reports headed our way at 12:30 pm GMT, the U.S. non-farm payrolls report!

Word on the street is that the report will show a net jobs gain of just 97,000. But seeing as how the ADP report gave us an upside surprise, we may just see the same for today’s NFP report!

In any case, make sure you check out Forex Gump’s latest post for the nitty-gritty on the NFP report!

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Thank you bad data! The U.S. dollar once again benefited from safe haven flows as the non-farm payrolls failed to meet market expectations last Friday. The U.S. dollar index, which tracks the currencies performance versus a basket of other major currencies, was able to mark a new monthly high at 83.91.

The U.S. non-farm payrolls showed that 80,000 net jobs were added in June, significantly lower than the 97,000 the market had initially predicted. In addition, the unemployment rate failed to show improvement as it remained at 8.2%. The only “good news” from the non-farm payrolls was that the previous month’s 69,000 was revised up to 77,000.

Strictly speaking, it wasn’t a terrible number, but it was disappointing. The economy is adding more workers but job creation just can’t keep up with the number of people entering the workforce. As a result, the unemployment rate is not improving.

This week, we’ve got a number of red flags on the U.S. economic calendar. Let me list them for you one by one.

On Wednesday, the U.S. trade balance will be released. It’ll come out at 12:30 pm GMT and is expected to show a 48.7 billion USD deficit. Last month, the deficit was at 50.1 billion USD. The FOMC meeting minutes will also be published on the same day at 6:00 pm GMT.

On Thursday, there’s the weekly initial jobless claims report. The forecast is that the number of people who claimed unemployment insurance has increased to 379,000 from 374,000 the previous week.

On Friday, the Producer Price Index and the University of Michigan Consumer Sentiment Survey will print. The PPI is slated to show a 0.5% increase while the consumer sentiment survey is anticipated to show a reading of 73.5.

As you can see, there are a lot of major reports coming out this week. Better keep a close eye on them as they may serve as catalysts for a sentiment shift! Be careful!

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Party’s over, boys! With no major data on the docket yesterday, the Greenback pared its gains against some of its counterparts. EUR/USD got a 60-pip breather at 1.2315, while USD/CHF also slid by 52 pips to .9751. What rained on the scrilla’s parade?

Aside from the lack of major data from the U.S., QE3-friendly speeches made by Fed head honchos like John Williams motivated the dollar bulls to take profit. In his speech, Williams called for “extraordinary vigilance,” saying that the Fed is ready to do what’s needed to help the economy. No subtle hints there!

It looks like the Greenback will be a puppet to risk appetite and QE rumors again today as only the IBD/TIPP economic optimism data at 2:00 pm GMT is scheduled for release. My ninja instincts tell me that we’ll hear more from Fed officials today, so keep your eyes peeled for any announcements!

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The dollar’s scorecard was as mixed as the reviews for the movie Abraham Lincoln: Vampire Hunter. While it scored a 62-pip gain against the euro and was up 16 pips against the pound, it gave up 17 pips to the yen as USD/JPY closed lower at 79.41.

It looks like the lack of economic reports from the U.S. left the dollar directionless on the charts yesterday. But fret not, Padawans! With the minutes of the most recent FOMC meeting due to be released later, I’m pretty sure the dollar will have an action-packed day.

The release is scheduled at 6:00 pm GMT. Traders will be on their toes for the details behind the Fed’s interest rate decision as they look for hints about QE3. Remember that on June 20, the central bank decided to extend Operation Twist and downgraded their growth and inflation forecasts for the U.S. economy.

If you don’t want to trade the event, maybe you can just play the U.S. trade balance report which is due at 12:30 pm GMT. The forecast is for imports to have exceeded exports by 48.5 billion USD in May. Should the report come in better than expected, we could see the dollar trade higher ahead of the FOMC minutes. Good luck!

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Better luck next time, folks! The Fed surprised markets yesterday when its FOMC minutes revealed less inclination to pull the QE3 trigger. The Greenback bulls celebrated the news and pushed USD/JPY to 27 pips higher to 79.68 while EUR/USD made a two-year low at 1.2243.

In its FOMC meeting minutes yesterday, the Fed cited worries over U.S. and Chinese economic growth as the main reasons why it had decided to extend its Operation Twist program. Unfortunately for QE3 fanatics, the Fed wasn’t convinced that the weaknesses warranted more bond purchases, at least for last month.

In fact, the minutes even revealed that a couple of Fed head honchos are thinking of other tools that could stimulate growth. No specific tools were discussed yet, so it’s still anybody’s guess for now. It could be Thor’s hammer, Dumbledore’s wand, or the One Ring for all we know!

The important thing to note is that the lack of willingness to pull the QE3 trigger caused a dollar rally and dragged high-yielding currencies lower across the board. But can the dollar bulls sustain the rally today?

Traders barely reacted to the trade balance data yesterday, but maybe the initial jobless claims and import prices out at 12:30 pm GMT will give them a kick.

If you remember, the U.S. trade deficit shrank from 50.6 billion USD to 48.7 billion USD in May due to lower oil prices and weak consumer demand. Let’s hope that the initial claims and import prices will show more optimism!

Oh, and don’t forget to watch the 30-year bond auction coming up at 5:00 pm GMT as well as the Federal budget balance report at 6:00 pm GMT!

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When risk aversion is here, the U.S. dollar is the king of the hill! The Greenback raked in gains against most of its major counterparts yesterday as rate cuts from all over the globe triggered a strong safe-haven rally. Will the U.S. dollar be able to hold on to its gains?

News of rate cuts from South Korea’s and Brazil’s central banks took the markets by surprise yesterday as this revealed that other economies are showing concern about the global economic welfare. Stronger than expected economic data from the U.S. also provided some support for the U.S. dollar as this eased fears of further easing from the Fed. The latest jobless claims figure came in at 350K, which was less than the estimated 376K in first-time claimants.

The U.S. is set to release its PPI data and its preliminary University of Michigan consumer sentiment report today. Producer input prices are expected to slip by 0.5% in June, following the 1.0% drop seen last May, while the core version of the report could show a 0.3% uptick. Meanwhile, the consumer sentiment reading for July is expected to improve from 73.2 to 73.5 but, if the actual figure misses the mark by a huge margin, the Greenback might be forced to return some of its gains. Keep an eye out for those releases starting 12:30 pm GMT!

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“Not today, not today,” cried the dollar bears last Friday as they were able to end the bull’s streak. The U.S. Dollar Index, which had made 3 consecutive winning daily candles, finally posted a losing day as it fell to 83.83 from 84.10.

Data released was mixed. On the one hand, the headline Producer Price Index came in much better than expected as it posted a 0.1% rise. The forecast was for a 0.5% decline. On the other hand, both the core PPI and the University of Michigan consumer sentiment survey failed to meet forecast as they printed a 0.2% gain and a 72.0 reading, respectively.

Will the Greenback continue to fall this week or is the Greenback’s sell-off merely a one-day thing? With the amount of market-moving events due this week, anything can happen.

Today, at 12:30 pm GMT, the U.S. retail sales report and the Empire State Manufacturing Index will be released. The retail sales report is predicted to show a 0.1% for both the headline and core versions. Meanwhile, the Empire State Manufacturing Index is anticipated to print a 3.9 reading.

There will be more going your way on the following days: the U.S. inflation figures on Tuesday, the building permits and housing starts on Wednesday, and the initial jobless claims and Philadelphia Manufacturing Index on Thursday.

As I said, anything can happen this week. Be prepared for a lot of volatility!

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And the Biggest Loser is… The Greenback! Weaker than expected U.S. consumer spending data triggered a U.S. dollar selloff as retail sales declined for the third consecutive month in June. Higher-yielders took advantage of dollar weakness and climbed after the release, but will these rallies last?

U.S. retail sales chalked up a 0.5% decline in June while the core version of the report showed a 0.4% drop instead of rising by 0.1%. This followed May’s 0.2% decrease in headline retail sales and the 0.4% drop in core spending. In fact, this was the report’s third month in consecutive declines!

Apparently, the weakness in spending was a result of the high level of unemployment in the U.S. and concerns about the state of the global economy. Traders were so overwhelmed by the disappointing retail sales figure that they simply ignored the better than expected Empire State manufacturing index, which climbed from 2.3 to 7.4 this month.

Today, the U.S. is set to release its CPI figures along with a few medium-tier reports such as industrial production and capacity utilization. Core CPI is expected to have risen by 0.2% in June while the headline figure could post a flat reading. With market participants buzzing about QE3 again, weaker than expected inflation data could actually result to another dollar selloff. Stay on your toes during the actual release at 12:30 pm GMT!

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Nice try, dollar bulls, but you’re gonna have to do better than that if you want to lock in some gains! Though the dollar gave other currencies a run for their money, it was unable to seal victories against its higher-yielding counterparts. At the end of the day, EUR/USD closed 11 pips higher at 1.2288, after falling to as low as 1.2189.

Fed Chairman Ben Bernanke played the markets like a fiddle yesterday! First, he sent the dollar racing up the charts by failing to hint at QE3. And then he sent traders on a dollar-selling spree after telling Congress that the Fed is prepared to take action if necessary! Way to confuse the markets, Bernanke!

But while the central bank head has steered away from committing the Fed to further QE, other Fed members have been vocal about the possibility of more stimulus. Cleveland Fed President Sandra Pianalto, for one, thinks that the U.S. still needs a “highly accommodative policy.”

Overall, it seems we cannot rule out the possibility of further easing. Some say it may come as soon as September!

In other news, yesterday’s inflation reports fell in line with expectations. Headline CPI clocked in at 0.0% from -0.3% the month before. Meanwhile, core CPI came in at 0.2% again, just as expected.

Today, we have a couple of U.S. reports on tap that are worth noting. At 12:30 am GMT, building permits data will be available. Look for the June report to show a total of 770,000 permits, down from May’s 780,000. Housing starts data is also set to come out at the same time, and survey says we could see an increase from 710,000 to 740,000.

Then at 2:00 pm GMT, Ben Bernanke will testify again. Though this speech may not have as big an impact as the one yesterday, it could clarify issues regarding the Fed’s stance, so don’t miss it!

Rounding up our day is the release of the Beige Book, due at 6:00 pm GMT. If you want an idea of what influences the FOMC’s rate decisions, this is the report to catch!

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Hang in there, fellas! Except for USD/JPY, the scrilla capped the day almost unchanged against its counterparts. It’s not due to lack of major market-moving reports though. What are the dollar bulls and bears are up to?

Yesterday Ben Bernanke fired up the dollar bears’ party when he repeated his stance on not implementing more QE in the near future. Of course, it also didn’t help the Greenback that the Beige book report hinted at weakening economic growth. Three Fed districts clocked in slower economic growth, which is thrice the number from the previous release. Weaknesses in manufacturing, confidence, and employment were also featured in the report.

But the dollar bulls didn’t give up without a fight! With Bernanke’s testimonies over and done with, traders are turning their focus back on the euro zone and the EZ officials’ lack of teamwork in dealing with the debt crisis. As a result, the dollar capped the day almost unchanged against the euro, pound, and the franc.

Will today’s U.S. economic data steal back the spotlight from the euro region? The 6.9% growth in housing starts and the 3.7% gain in building permits didn’t catch attention yesterday since the reports are known to show volatile results anyway.

Maybe the initial jobless claims data at 12:30 pm GMT and the existing home sales and Philly Fed index reports out at 2:00 pm GMT will provide more action. The initial jobless claims is expected to rise after the July 4[SUP]th[/SUP] holidays, while markets are expecting better numbers for existing home sales and the Philly Fed data.

Trade well today, homies!

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More data = more bad news! The U.S. added to its collection of disappointing stats yesterday, fueling bets for QE3 to the dismay of dollar bulls. Soft U.S. reports crippled the dollar, leading it to weaken against all of its major counterparts except for the euro and the franc.

Jobless claims rose once again, hitting 386,000 last week to exceed forecasts which called for 367,000 filings. However, I did some research and apparently, these figures were bloated by a change in the timing of annual automobile plant layoffs.

Existing home sales, on the other hand, had no excuse for printing crummy results. Home sales slumped to its lowest level this year, clocking in at 4.37 million last month. This is a huge disappointment considering many had anticipated home sales at 4.63 million.

The Philly Fed manufacturing index rounded up the pity party with more worse-than-expected results, as it rose from -16.6 to just -12.9, instead of hitting -7.9 as many had expected. Hah! It looks like the case for QE3 is getting stronger and stronger! The question is, will the Fed bite?

Hmm… From the looks of it, it may take a few months worth of dismal data to convince Bernanke of the urgent need for more easing, so we may have to wait a bit longer to see how all of this plays out.

No big reports from the U.S. today. So if you plan on trading the dollar, set your eyes on Europe and keep track of the market’s risk sentiment!

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Now that’s how you end the week in style! With risk aversion back with a vengeance, the dollar trumped all its major counter parts last Friday. EUR/USD tested as low as 1.2150, while GBP/USD closed over 100 pips lower to finish at 1.5615.

The dollar benefitted last Friday, as concerns about the European debt crisis continued to weigh heavily on the markets. Apparently, a bank bailout may not be enough for Spain, and its government may be required to beg for one as well! Investors are quickly losing confidence in Spanish debt, whose yields traded as high as 7.18% last Friday. Yikes!

Once again, no hard data headed our way from Uncle Sam today, but make sure you keep tabs on Europe. Also, take note that many dollar pairs have weekend gaps (in favor of the dollar), and normally, these gaps tend to fill. Good luck trading today homies!

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If risk is off and it don’t look good, who ya gonna call? The Greenback! Thanks to uncertainties in the euro zone, risk aversion propped the U.S. dollar up against most of its counterparts yesterday. Read on to find out what’s in store for the Greenback today.

Although the U.S. didn’t release any data yesterday, the Greenback found support from ongoing euro zone debt concerns. Apparently, another major Spanish city is rumored to need financial assistance from the government as the debt crisis in Spain grew worse. Make sure you check out my euro zone commentary for the rest of the details!

There aren’t any top-tier reports due from the U.S. today, but don’t forget that Fed Chairman Ben Bernanke is set to give a speech at 12:45 pm GMT. Even though we’ve probably already heard most of what Big Ben has to say during his testimonies last week, it’d be best to prepare for additional volatility just the same. Make sure you set those stops right if you’re trading the dollar pairs!

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Chalk up another victory for the scrilla baby! Once again, the dollar edged higher versus higher yielding currencies, as risk aversion was still present in the markets. Can dollar domination continue or could we see a midweek reversal?

Only piece of data to hit the airwaves yesterday was the manufacturing purchasing managers’ index, which came in slightly worse than expected at 51.8, just below the 52.1 forecast. This just goes to show that manufacturing industries are still chillin’ right now, as business activity is quite slow.

In other news, Bernanke didn’t drop any clues in his speech about early childhood education yesterday.

For today, we’ve got new homes sales figures headed our way at 2:00 pm GMT. Expectations are that the annualized pace of new home purchases rose to 372,000, up from the 369,000 we saw last month. Keep in mind that housing figures have been on a roll lately, so it’s quite possible that we could be in for an upside surprise later today.

We also have Treasury Secretary Timothy Geithner speaking tonight in front of the House Financial Services Committee today at 2:00 pm GMT. As the top gun of the Treasury, his words can sometimes weigh heavily on the markets, especially if he begins commenting on the state of the economy and the dollar.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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