Daily Economic Commentary: United States

Trading Discussion News and Economy
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In the absence of US economic reports, the greenback’s performance was “Hot 'N Cold” yesterday as it weakened against the pound and yen but strengthened against the euro. Could it be that traders are still unsure where to take the greenback as they await the Fed Chairman’s testimony this week?

After the Fed raised the discount rate last week, Fed officials have been reiterating that the 25 basis point hike shouldn’t be interpreted as a tightening move from the central bank. Yesterday, Fed official Janet Yellen emphasized that it was not yet the right time to remove monetary stimulus. Although she mentioned that an economic recovery is underway, she warned that the strict credit conditions could hamper growth. Ben Bernanke’s speech on Wednesday could adopt the same cautious tone.

But before that, let’s take a look at the economic reports on today’s agenda! The S&P housing price index, which is due 2:00 pm GMT today, could show that house prices fell by 3% year-over-year in December. This would be a smaller decline than the annualized 5.3% drop seen in November.

Also due today is the CB consumer confidence index, which could slide from 55.9 to 55.0 in February. If the actual figure due for release at 3:00 pm GMT shows a deterioration in consumer confidence, greenback buying could come to a screeching halt.

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It was a crazy day for the dollar bulls yesterday! The USD staged a broad-based push against most of the other majors. Wow. Combined dismal economic reports from the UK, euro zone, and the US led to a massive dollar buying.

Selling pressure continued to hound the higher yielding assets during the US session when the February CB consumer confidence index unexpectedly fell to 46.0 from 56.5 as the view for jobs in the US start to become a little hazy. A weak outlook in the job market indicates that consumer spending could be frail as well. The latest figure is its lowest reading in 10 months.

Equities and higher yielding immediately sunk while the USD and yen soared following the report.

At 3:00 pm GMT today, Fed Chairman Ben Bernanke will testify on the semi-annual monetary policy report before the House Financial Services Committee. In his speech, he’ll discuss if more stimulus is needed to promote more jobs in the US especially now that the outlook for it is starting to turn sour again. Obviously, any hawkish statement could lead to another dollar buying.

The US’s new home sales figure in January will also be due at 3:00 pm GMT today. Sales are seen to be at 354,000 on top of the 342,000 score in the month prior. An upbeat number here could possibly temper the dollar’s recent ascent.

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Wednesday started off with the dollar moving lower as a result of some profit taking from its stellar rally from the day before. Once US economic data was released, however, risk aversion set in, helping the dollar erase its losses and end the US session hardly changed against most major currencies.

The new home sales report, which was expected to print that an annualized number of 354,000 homes were sold in January, only came out with a reading of 309,000. The unexpected fall in the new home sales spurred a case of risk aversion amongst traders, which, needless to say, pushed the dollar and the yen higher versus all the other currencies.

During the same time, however, Federal Reserve Chairman Ben Bernankereiterated the bank’s commitment to keep rates steady for an “extended period,” which capped the dollar’s gain yesterday. I think Forex Gump’s right on this one, the prospect of speculation of a rate hike earlier than expected is too far-fetched, especially with the country’s ugly labor market situation and poor consumer confidence.

Expect another wacky day today as a bunch of high-profile events from the US are scheduled.

At 1:30 pm GMT, the durable goods orders and the unemployment claims are due.

The durable goods orders report for January is expected to show an increase of 1.6%, higher than December’s revised up 1.0% gain. However, the core version of the report, which excludes the sales of transportation items such as airplanes and cars, is predicted to show a growth of 1.1%, down the 1.4% increase from the month before. Items are considered durable goods if they do not easily wear out, and have a lifespan that exceeds three years.

Meanwhile, the unemployment claims report is predicted to show that 461,000 people claimed for jobless insurance for time for the week that ends in Feb. 20.

Shortly after, at 2:00 pm GMT, Fed head Ben Bernanke will be speaking again. This time, he’ll be talking before the Senate Banking, Housing and Urban Affairs Committee. Just like yesterday, he’ll be reporting on the status of the bank’s monetary policy.

So there we go forex friends… A couple of high-impact economic events today that could help the dollar bust out of its trading range… Stay safe!

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Poor data early on in the US session sparked a mini run of risk aversion, as durable goods orders and unemployment claims came in worse than expected.

Reports showed that durable goods rose by 3.0% in January after it was expected that orders would rise by just 1.6%. You may be asking, “I thought that durable goods came in better than expected? Isn’t this good news?” Well, yes, the headline data did but remember, all the hotshot experts and analysts focus on the core durable goods figures because it doesn’t include transportation goods (whose prices are volatile), so we should focus in on core data as well! The report indicated that core orders fell by 0.6%, after it was predicted to have risen by 1.1%! This indicates that consumer demand is weakening.

The labor situation isn’t getting better either, as unemployment claims came in much higher than forecasted. Claims for last week were at 496,000 continuing a disappointing trend of not living up to expectations. It’s no wonder consumer confidence is dropping!

US Fed governor Ben Bernanke delivered a speech once again yesterday, but his comments didn’t really cause too much of a market reaction as he basically repeated what he said the day before. He did talk a little about Goldman Sachs and their role in deals with Greece’s derivatives. I’m looking forward to see how this develops as the everyone is keeping an eye out for news from Greece right now.

We’ve got a slew of data coming out today that could make this wild week even wilder. At 2:45 pm GMT, the Chicago PMI report will be released. It is expected to print a reading of 59.6, down from a reading of 61.5 the previous month. The index measures business sentiment according to survey results from business managers. With a reading above 50, this would indicate that expect business conditions are picking up.

Later on at 2:55 pm GMT the revised University of Michigan consumer sentiment report is on deck. Forecasts are for a score of 74.0, a slight uptick from last month’s level of 73.7. Given how the consumer sentiment report earlier this week revealed that sentiment has dropped like a brick, could we see worse than expected figures from the UoM report?

Also due today are existing home sales data at 3:00 pm GMT. The annualized rate of existing homes that were sold is seen to rise from 5.45 million in December to 5.51 million last month. It’ll be interesting to see what figure comes out. Remember, earlier this week, new home sales figures were much worse than expected…

Before I forget, Fed lone wolf Thomas Hoenig will be delivering a speech to kick off the festivities at 1:30 pm GMT. In case you forgot who Hoenig is, he’s the Fed member who said a few weeks back that the Fed needed to hike rates sooner rather than later. Well, he got part of his wish as the discount rate was raised last week. Let’s see if contradicts other Fed members and says that other interest rates should be hiked up as well.

Okay that’s it for today… Ha! You thought I forgot about the GDP report due later?! Course not! It’s coming out at 1:30 pm GMT. I just read Forex Gump’s recent post, and I’ve also got a hunch that we may see GDP figures come out worse than expected…

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Not so fast! After almost an entire week’s worth of safe-haven rallies, risk appetite came back in stride last Friday. With this week’s economic schedule filled to the brim with high impact reports, was last Friday’s move merely a pullback or would the greenback continue to lose?

First, a quick glance back at the economic events from the end of the previous week: Except for the existing home sales report that came in below consensus, Friday’s set of economic figures were on the upbeat end. The preliminary GDP report enjoyed an upward revision from 5.7% to 5.9%, indicating that economic growth was stronger than previously estimated. Aside from that, the Chicago PMI exceeded expectations and surged from 61.5 to 62.6 in February. Looks like the US economy is in pretty good shape…

Because of that, Fed official Charles Evans decided that it was about time to give a time frame for the central bank’s pending rate hikes. Well, this should be big news, considering how Fed officials have been sticking to the “interest rates will remain low for an extended period of time” script for quite a while now! Evans predicted that the Fed would likely be ready to raise rates after three to four FOMC meetings. That means the first Fed rate hike could take place in June so I’d definitely be on the lookout for that.

Instead of turning bullish on the greenback based on strong economic data and the prospect of an upcoming rate hike, traders became a bit more confident as they gunned for riskier and higher-yielding assets. Does this mean that risk sentiment would be the driving force of the markets for this week?

The first dose of economic reports this Monday could determine whether risk tolerance is here to stay. Consumer sector data, namely the personal spending and personal income reports, are due 1:30 pm GMT. Both reports are expected to print larger upticks relative to those posted in December. Later on, at 3:00 pm GMT, the ISM manufacturing PMI will be released. This index is expected to dip from 58.4 to 57.7 in February. Note that this indicator has been steadily climbing since November and a weaker than expected figure could bring back risk aversion.

On Tuesday, the greenback could pause to catch its breath as the US economic schedule is free from top-tier reports. Only the total vehicle sales, which is expected to reach 10.6 million in February, is due then.

Wednesday has the ADP non-farm employment report on tap. Most traders are probably keeping a close eye on this report, knowing how it usually serves as a preview of the upcoming non-farm payrolls report. Based on the ADP report, only 13K in net job losses are expected for January, a lower figure than the 22K increase in employment seen in December. Also due on Wednesday are the ISM non-manufacturing PMI and the Fed’s Beige Book.

Aside from the usual weekly jobless claims due Thursday, also set for release are the pending home sales and factory orders reports. Both are slated to post 1.4% growth for December, following a 1.0% increase in November.

And on Friday… drum roll, please… the NFP report! After failing to print a positive reading last time, the NFP report could show a much larger increase in employment for January. A total of 40K in net job losses are expected to follow December’s 20K reading. This could bring the unemployment rate from 9.7% up to 9.8% for the month. Uhoh, it seems like the economic recovery wasn’t as smooth-sailing as many hoped. Weaker than expected figures would most likely keep risk-taking in check this week.

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Despite the strength of the US capitals market, the USD started the month of March on a bright note. At the end of the day, the USD closed the session mixed versus the other major currencies.

Personal income and personal spending in January also came mixed with personal spending coming in at 0.5% which is better than the 0.4% consensus. Personal income, however, fell to 0.1% from 0.3%.

On separate reports, both the core PCE’s and ISM manufacturing PMI’s results were met with pessimism which led to a dollar rally. The core PCE price index in January came in flat at 0.0% while the country’s manufacturing PMI also fell short at 56.5 which is below the market’s 57.7 consensus and last period’s 58.4 score.

No major economic reports are scheduled for release in the US today. Volatility in the USD, however, could be ignited by the upcoming GDP report in Switzerland, CPI release in the euro zone, and the interest rate decision in Canada. Watch out for these events!

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The dollar traded in a mixed fashion against other major currencies yesterday. The dollar entered the Asian session with a strong rally but failed to keep its momentum and lost all of its winnings once the US trading sessions started.

It seems that the culprit for the dollar’s drop early during the US trading session was improved risk appetite supported by the rally of US stocks. No important data was released yesterday but we’ve got a bunch of high-profile reports on the economic cupboard today.

First up, at 1:15 pm GMT, is the ADP non-farm employment change report. The forecast is that 15,000 net jobs were lost in February, lower than the 22,000 jobs shed the month before. The report usually creates a significant market impact because traders tend to see it as a leading indicator of the upcoming non-farm payrolls on Friday.

Shortly after, at 2:00 pm GMT, the ISM non-manufacturing PMI for February is due. Similar to the manufacturing PMI released earlier this week, the index measures whether the non-manufacturing industry is growing or shrinking by using a boom/bust scale. A reading above base line 50.0 indicates that the industry is expanding while a reading below 50.0 means otherwise. The expectation is a reading of 51.0, slightly higher than January’s reading of 50.0. If consensus holds, it would mark the fourth month in a row of gains.

Lastly, at 7:00 pm GMT, the Fed’s Beige Book will be released. The Beige Book summarizes the economic conditions as seen by the Federal Reserve Banks in the US. This report allows outsiders (traders like you and me) to know what the Fed governors are looking at in preparation of their upcoming FOMC meeting.

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The dollar cried “Uncle” in yesterday’s trading session, as it got beaten up across the board on increased risk appetite and news coming out of the euro zone. For the 2nd day in a row, the EURUSD finished higher to close at 1.3696.

According to the Beige Book released yesterday, the US economy is showing signs of improvement. It seems that Fed took this as a positive sign, as 9 out of 12 regions improved despite the poor weather this past winter. Given these developments, could it be time for US head honcho Ben Bernanke to stop saying that they will keep rates low for an ‘extended period’? Or will Fed officials wait for improvements in all 12 regions before changing their stance?

In other news, risk appetite was boosted by the results of the ISM non-manufacturing PMI report. The index printed a score of 53.0, which beat consensus of a reading of 51.0. This indicates that non-manufacturing industries are showing expansion.

The ADP non-farm employment change report was also released yesterday, coming in slightly worse than expected. According to the ADP, job losses were at 20,000 last February, higher than the expected 15,000 figure. What’s important to note here is that January’s figure was revised down from 22,000 to 60,000! It seems that labor conditions are still unstable. Could this be a sign of things to come tomorrow when the NFP report is due?

Today, we’ve got another round of data coming out in the form of unemployment claims, pending home sales data and factory orders figures. Jobless claims are expected to have dropped from 496,000 the previous week to 472,000 last week. Meanwhile, pending home sales and factory orders for January are seen to have risen by 1.4%. Given the poor weather we saw this past winter, could we be in for a downside surprise? After all, Big Ben Bernanke recently pointed to poor weather conditions for the down tick in consumer spending last quarter…

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Dollar domination! Traders flocked to the safe-haven US dollar after economic reports from the US came in much weaker than expected. Does this set the stage for today’s much-awaited event, the non-farm payrolls report?

First, let’s review yesterday’s set of economic reports. Labor productivity climbed by 6.9% in the fourth quarter, outpacing the consensus of a 6.2% increase. This higher than expected increase has negative implications for wage rates since a rise in productivity implies that corporations are doing well with their current set of employees. This means that they wouldn’t need to hire more and that they wouldn’t need to hike wages in order to spur more productivity. In fact, wages actually fell by 5.9% during the quarter, its biggest drop in more than five years. Lower wages could then constrain consumer spending, which would weigh down economic activity in the US.

Furthermore, pending home sales posted an unexpected decline of 7.6% instead of increasing by 1.4% in January. This implies that the extended tax credit is doing very little to spur home-buying.

Now, for the main event! Drumroll please… the non-farm payrolls report! This employment report is now expected to print 56K in job losses, downwardly revised from the previous estimate of 40K in job losses. Uh-oh, it seems like labor conditions aren’t picking up in the US. Just like Forex Gump pointed out in his NFP preview, the increase in unemployment was likely a result of the poor weather conditions during February. Although a bleak figure could be reported at 1:30 pm GMT today, analysts are hopeful that jobs growth will eventually pick up during March.

An even weaker than expected figure could continue to push the US dollar higher by virtue of its safe-haven status. But if traders decide to focus on fundamentals and consider that weaknesses in the jobs market could eventually hamper US economic growth, massive US dollar selling could ensue. Either way, this report is bound to turn the heat up in today’s trading session. Be careful out there!

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Risk appetite placed the USD back on camp last Friday. The dollar incurred a broad-based loss versus the high yielders following a smaller drop in US payrolls. The dollar only strengthened against its counterpart in the East, the Japanese Yen. The USDJPY jumped to 90.36 from 89.12.

The USD remained pretty much flat for the most part of last Friday’s trading up until the result of the US NFP employment change came out. Firms in the US surprisingly slashed only about 36,000 jobs which is much better than the 56,000 estimate. And as a result, the US’s jobless rate managed to remain at 9.7%.

No high impact economic reports are due in the US during the first two days of the week. But on Wednesday, the US government Federal budget balance will be on check. The country’s budget deficit is seen to balloon to -$199.5 billion from -42.6 billion. Such deficit in spending is of course going to be funded through debt which will further place some pressure on the USD.

The US’s trade balance and weekly initial jobless claims are due on the same day as well. The country’s trade deficit is seen to worsen slightly to -$40.8 billion in January from -40.2 billion. Unemployment claims for the week ending March 6, on the other hand, are seen to come in lower at 453,000 from the previous week’s 469,000 tally.

On Friday, the US’s February retail sales and March UoM confidence index will be reported. Retail sales likely slid by 0.1% after a 0.5% gain in the previous month. The UoM confidence index, though, is seen to have risen a little to 74.0 from 73.6

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Down and up the dollar went yesterday, losing out early in the Asian and European trading session but eventually bounced back to life once the US trading session went underway. The dollar was able to post some gains across the board, particularly against the pound.

Just like yesterday, today’s economic cupboard lacks any high-profile economic report. With the absence of any fundamental catalyst, we could see the major currencies pairs just bounce around major support and resistance levels. Then again, if risk appetite starts picking up again, we could Friday’s move follow-through today. This means another round of dollar selling!

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The dollar went on a rumble early on yesterday, as it galloped its way against the euro and pound on increased risk aversion. However, as the day went by, the dollar bulls’ legs got tired and gave up some their gains. With more data on deck, what will we see today?

The safe havens got a boost from risk aversion during the earlier sessions, as news came out regarding the status of sovereign debt in some European countries. Word on the street is that Portugal may just get hit by possible downgrade. As long as these concerns keep popping up, we can probably see the dollar continue its gains versus the euro.

The same can’t be said for the com-dolls though. The dollar has taken a beating against the Aussue, the Loonie adn the Kiwi. As my buddy Forex Gump said in a recent post, both the Australian and Canadian economies have been doing well as of late, boosted further by strong commodity trading. I’m going to keep my eyes and ears open for more news on this, as it appears that the correlation between currencies is breaking more and more.

Today, we may see stronger moves than what we’ve seen this week, as we’re finally getting some medium impact news from the US. At 3:00 pm GMT, crude oil inventories are due, and are expected to print a figure of 2.1 million. This would mean that companies are holding less barrels of crude oil than in previous weeks. Take note of how this affects the USDCAD pair – remember, the USDCAD is almost at parity!!

Later on, at 7:00 pm GMT, the Fed budget balance will be released. The Fed’s deficit is expected to balloon 42.6 billion in January to a whopping 204.5 billion in February. Yikes! Will the increased spending spook the markets? Let’s wait and see!

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The greenback’s performance yesterday was mixed as it edged higher against the pound, yen, and loonie but ended weaker against the euro, franc, and Aussie. Did the lack of US economic reports leave the greenback directionless for the past 24 hours?

The only economic report released yesterday, the wholesale inventories data, printed a 0.2% decline. This was below the consensus of a 0.2% increase but not to worry! A smaller than expected figure actually indicates that companies are having a difficult time keeping up with higher demand for their products, which just means that spending and sales are growing at a strong pace. However, this upbeat report had a minimal effect on the greenback.

This was probably because the US government’s monthly budget report revealed that the deficit swelled to a record high in February. Analysts now project that the yearly deficit will outpace the $1.4 trillion debt from last year. Yikes!

The US will release its trade balance and weekly jobless claims today. The trade balance could come in at a deficit of $40.9 billion, larger than the previously reported $40.2 billion. Meanwhile, this week’s unemployment claims are expected to stand at 456K, less than the previous week’s 469K. Weaker than expected figures could force the greenback to cough up its recent gains.

Keep an eye out for Chinese data due 9:00 am GMT today since these reports could have a huge impact on risk sentiment. China’s industrial production is slated to climb an annualized 19.5% in February, on top of the 18.5% year-over-year increase seen in December. Its CPI is expected to soar by 2.5% while its PPI could rise by 5.2%. Lastly, its retail sales for February could soar by 18.5% from the previous year. Robust figures from the Asian giant, eh? But if the actual figures disappoint, gear up for a huge wave of risk aversion.

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The USD came out mixed again yesterday as it lost against the EUR, GBP, CAD, and CHF. Its only consolation was some close wins over the AUD and NZD. This time, it was the conflicting US trade balance and unemployment claims results that made investors a little iffy.

The greenback experienced some major volatility when the results of the two mentioned accounts were published. The country’s negative trade balance surprisingly narrowed to -$37.3 billion (vs. -$40.9 billion) in January from -$39.9 billion due to a slide in automobile and oil imports. Exportslikewise declined by 0.3% which prompted President Obama to create a “task force” that will push US trade.

On a separate report, initial jobless claims for the week ending March 6 was at 462,000 which was a lot more than the 456,000 consensus. This result sent investors fleeing again back to the safety of the USD. Later, though, the sellers jumped back again, pushing the greenback to its daily lows.

Today, the US retail sales and UoM consumer sentiment index will be reported at 1:30 pm GMT and 2:55 pm GMT, respectively. The headline retail sales are seen to have declined slightly by 0.1% in February. Though, the core version of the account is projected to have gained by the same percentage.

My buddy, Forex Gump, recently published an article regarding today’s US retail sales report. Kindly check it here.

March’s consumer sentiment will be next on today’s schedule. Sentiment for March, based on the market’s estimate, likely reached 74.0 from 73.6. An improvement in the consumer’s outlook of the economy could prompt them to spend more, leading investors to take some short term risks.

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The US dollar bore the brunt last Friday as it fell against almost all the major currencies. The US dollar index, which tracks the performance of the dollar relative a basket of foreign currencies, ended the day at 80.27, last week’s lowest level.

Dollar weakness that day came in the form of a nomination by President Barrack Obama. Janet Yellen, known for her dovish stance towards monetary policy, was nominated by President Barrack Obama to be the Vice Chairman of the Federal Reserve. This was taken by the markets as a sign that the Fed will keep interest rates at ultra-low levels well into 2010.

Additionally, the retail sales report that day came out with an upside surprise, which was able to prop up risk appetite. It showed that retail sales in February 0.3%, opposite the 0.2% decline initially expected. Meanwhile, the core version of the report, which excludes vehicle sales in its computation, also beat consensus when it reported a that sales rose by a whopping 0.8%.

The University of Michigan consumer sentiment index, however, didn’t share the same positive tune. It revealed that consumer sentiment fell this March to 72.5, slightly lower than the 74.0 forecast and the previous period’s reading of 73.6.

This week will kick-off with the release of the empire state manufacturing index at 2:30 pm GMT. The survey, which assesses the business outlook and conditions of the manufacturing industry in New York, is expected to print a reading of 22 in March, lower than February’s 24.91. A positive number signals that businesses are optimistic about growth prospects while a negative number means that business conditions are poor.

Speaking of the manufacturing industry, following shortly at 3:00 pm GMT, is the industrial production report for February. The expectation is that industrial production growth slowed down to 0.1% from 0.9% in January. Rising production is usually seen as positive for the domestic currency because it indicates that consumer activity is picking up, which in turn, could lead to economic growth.

Looking ahead, a couple of high-profile economic events are coming up.

Tomorrow, at 6:00 pm GMT, the Federal Open Market Committee will announce its decision on the country’s interest rate. Although it is widely expected that they will keep rates unchanged at 0.25%, I’d keep my ears open for the accompanying statement for any change in their dovish stance regarding monetary policy.

On Thursday, at 2:30 pm GMT, the US consumer price index will be released. The forecast is that the average price of consumer goods and services rose 0.1%. The core version of the report, which excludes the prices of volatile items such as gas and cars, is expected to show a 0.1% decline.

To recap… the dollar lost towards the end of last week, when risk appetite came crashing down on the market. Its losses, however, were small compared to the amount of ground it gained since the start of the year. For now, the underlying trend remains in favor of the dollar, and unless the euro zone debt drama blows over, it seems that the dollar’s losses will be capped.

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Talk about starting off the week on a high note! After dropping across the board last Friday, the dollar made a nice comeback against most majors in yesterday’s trading sessions. What could have caused this move?

The Empire State manufacturing index came out slightly better than expecting, printing a reading of 22.9, after it was expected to show a score of 21.9. This indicates that business sentiment in New York has picked up slightly. Meanwhile, industrial production figures were also made available yesterday. Growth in industrial production came in line with expectations, falling from 0.9% in January to just 0.1% in February.

Still, it wasn’t news from the US that pushed the dollar higher. In fact, the dollar’s rally started early in the European session. The cause? News from the euro zone about indecision towards what kind of support to give Greece, as well as rumors that Moody would be cutting the UK’s credit rating spooked the markets, making traders unwind their positions in riskier assets.

In addition, I have a feeling that traders were also positioning themselves ahead of the FOMC report coming out tonight at 6:15 pm GMT. While it isn’t expected that the Fed will raise interest rates just yet, they will be listening out for the key words “extended period”. Actually, they might be hoping that the Fed removes this from their statement altogether! Remember, the Fed has stood still on its “cautiously optimistic” stance, not quite ready to say that it is time to implement exit strategies. Any indication that the Fed is now more optimistic over the recovery may increase sentiment towards the dollar.

Before the FOMC report however, housing data will be on deck at as building permits and housing starts figures will be available at 12:30 pm GMT. The annualized figure of new building permits granted is seen to have decreased slightly from 620,000 to 610,000. Meanwhile, the annualized pace of new homes that began construction last month is also seen to have fallen from 590,000 to 570,000. I don’t think we’ll see much of a reaction to these reports unless we see a major surprise, as traders will probably be waiting for the FOMC statement.

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Although the Fed struck their usual cautious tone, the FOMC statement still caused quite a ruckus in the markets. The greenback sold off like pancakes at a state fair yesterday as the Fed retained the phrase “extended period” when discussing how long they would keep rates low.

The Fed noted that the economic rebound continues to strengthen, keeping many speculators still hopeful that interest rate hikes are on the horizon. In fact, Kansas City Federal Reserve Bank President Thomas Hoenig once again dissented, saying that the extended period of exceptionally low rates is no longer warranted. On top of that, the statement highlighted the stabilization in the labor market and the significant rise in business spending.

Economic reports released yesterday came in line with expectations, with the building permits report printing a 0.61 million reading for February. Housing starts landed at 0.58 million in the same month, marking a 5.9% decline from the previous year. Analysts pointed out that, aside from the snowstorms that may have derailed an improvement in the housing market, tight credit is also another burden on the industry.

Inflation indicators, in the form of the PPI and core PPI reports, are due 12:30 pm GMT today. Producer prices are expected to dip 0.2% in February after surging by 1.4% in the previous month. The core PPI, on the other hand, is eyeing a 0.1% uptick on top of the 0.3% climb in January.

Aside from that, Big Ben Bernanke is scheduled to testify today at 6:00 pm GMT. Along with former Federal Reserve Chairman Paul Volcker, he will be talking about a the link between Fed supervision and monetary policy before the House Financial Services Committee in Washington DC. Be on the lookout for hints on the central bank’s future monetary policy moves!

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The greenback was almost completely shut out in yesterday’s trading, winning only against the euro and closing flat versus the yen. The USD flat out lost again vis-à-vis the other majors. Will the dollar-selling continue today or will the dollar bulls finally take the driver seat?

Positive sentiment among the investors, which kept the dollar weak, was supported by the upbeat employment data from the UK and the BOE’s stance to keep its interest rate low. Meanwhile, the still ongoing issue regarding Greece’s deficit has continued to weigh on the EUR.

On the other hand, the BOJ’s decision to maintain their interest rate while doubling the amount of their lending program also sparked some optimism among investors early during the Asian session.

In the US, the country’s PPI unexpectedly fell by 0.6% in February, which was worse than the -0.2% estimate. The core version of the account, however, came in line with expectations at 0.1%. Later during the session, Fed Chairman Ben Bernanke and former Fed Chairman Paul Volcker testified on a link between Fed Bank supervision and monetary policy before the House Financial Services Committee. None of them, though, delivered any statement that caused the markets to swing.

Today, a bunch of economic reports will be coming out of the US. The country’s February CPI figures are due at 12:30 pm GMT. Both the headline and the core CPIs are seen to be at 0.1%. Though, the headline figure could come out slightly lower due to the unexpected drop in the country’s PPI. Such could be bearish again for the USD.

Initial jobless claims for the week ending March 13 plus the nation’s 4Q current account balance will also be due at 12:30 pm GMT. Unemployment claims are expected to print another 456,000. Meanwhile, the country’s current account deficit likely expanded to -$120 billion from -$108 billion during the fourth quarter of last year.

The Philadelphia Fed index for the month of March will likewise be released later at 2:00 pm GMT. The index is seen to remain flat at 17.6.

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The dollar turned out to be the Alpha-currency on Thursday’s trading session, leading ahead against the entire pack. The US dollar index, which tracks the performance of the dollar against a fixed basket of currencies, rose to 80.84 from 80.19.

Yesterday’s move, once again, was all about Greece! Apparently, Greece believes that help from other European Union nations is unlikely and could decide to ask the International Monetary Fund for aid instead. All the uncertainty surrounding the issue gave rise to risk aversion, causing investors and currency traders to let go of their high-yielding currencies, particularly the euro, in favor of the dollar.

Economic data that came out was mixed.

The US consumer price index showed that prices remained flat in February instead of rising by 0.1%. However, the core version of the report that excludes automobile prices showed a 0.1% increase, right in line with expectations. It seems inflation remains low, giving me more reason to believe that the Fed would stick to keeping its rates low for an “extended period.”

The weekly initial jobless claims showed some improvement. It revealed that 457,000 people claimed unemployment benefits for the first time for the week ending in Mar. 13, slightly lower the 462,000 figure seen the week before. It marked the third decrease in a row. Could this be a sign that companies are shedding fewer jobs now that economic recovery is underway? I think it’s too early to tell, given the amount of mixed data we’ve been seeing from the US.

In other news, the current account balance that was released yesterday managed to beat forecast. It reveal a $116 billion deficit, higher than the $102 billion deficit from the month before, but lower than the $120 billion deficit initially expected.

Towards the end of the European session, the Philadelphia manufacturing index came out with optimistic news. It showed that the manufacturing industry in the Philadelphia area expanded again and printed a reading of 18.6 for March, an improvement from both forecast and February’s reading.

For today, the economic cupboard is pretty light, which could keep major support and resistance levels intact. Then again, it is Friday and we could see some volatility towards the end of the European trading session as currency traders close shop for the week.

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What a day for the dollar!! The greenback rolled through the markets, closing shop ahead against most majors despite the lack of any key economic data releases.

It seems that risk aversion played a role in Friday’s trading, as concerns regarding the Big Fat Greek Debt issue still weighs heavily on the markets. As long European officials are unable to come up with a unified solution to Greece’s debt problems, this will help the dollar continue to post gains versus the euro.

This week, we start the week off with words from US Treasury Secretary Tim Geithner. He’s scheduled to speak tonight at 8:30 pm about financial reforms. It’s his job to explain the government’s economic policies and strategies, so it’ll be interesting to see how the markets react to his comments.

Tomorrow, we’ve got existing home sales data due at 2:00 pm GMT. The annualized pace of old homes sold is expected to dip for the 4th consecutive month, bringing the figure down to 5.01 million. This indicates that there is still weakness in the housing markets, which is one reason why the Fed wants to keep interest rates at low levels for an extended period. If this figure comes in worse than projected, it may just cause risk aversion to rule the day.

The key data being released this week will be durable goods orders and new home sales figures coming out on Wednesday. Durable goods are expected to have risen by 0.9% in February, while core orders are projected to have increased by 0.6%. Meanwhile, new home sales data is expected to print an increase in the annualized rate from 309,000 to 316,000, which would mean the first increase in four months!

And lastly, before I end this post, let me remind you that those lawmakers over in Washington will be discussing the health bill, which I feel the markets will have their eyes geared towards. How come? No, it isn’t because all those wealthy traders on Wall Street need better health coverage – it’s because of how much the whole darn thing is gonna cost the American public! I’ll keep you posted on these developments and who knows, maybe my good buddy Forex Gump will have something on this topic by the end of the week.