Daily Economic Commentary: United States

Trading Discussion News and Economy
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The greenback seemed to have lost its mojo yesterday as it ended weaker against the other major currencies. Was this spurred by improved risk appetite or are traders wary about the effects of the newly-approved health care bill on the US dollar?

The US Congress’ approval of the health care has thrown the spotlight back on the government’s bulging deficit. With an estimated $940 billion in costs, would the US have enough funds to support the health care plan? If it doesn’t, would the government impose higher taxes so that they’d have more to spend? How could this affect consumer spending then? My oh my, plenty of questions keep coming to mind and these may have caused many to doubt the credit standing of the US.

On top of that, US and China continue to bicker about the revaluation of the yuan. US has warned China that, if it doesn’t take steps to remove the yuan’s peg on the US dollar, they would be labeled as currency manipulators in the US Treasury’s semi-annual report. Yesterday, China’s central bank governor retorted that this “noise” coming from the US lawmakers isn’t helping at all. Talk about tension!

On the economic front, the US is set to release their existing home sales report at 2:00 pm GMT today. This report could show that existing home sales for February stood at 5.01 million. A better than expected figure could provide some support for the greenback.

Treasury Secretary Timothy Geithner and FOMC member Thomas Hoenig are scheduled to deliver speeches today. Geithner could talk about the government’s involvement with mortgage finance companies like he did in his testimony yesterday. Hoenig, on the other hand, could drop hints about the future monetary policy decisions of the Fed. Stay tuned!

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The USD ended yesterday’s session in a mixed fashion, winning against the GBP, EUR, and JPY, but losing versus the com-dolls. Will the expected increase in the US’s durable goods orders and new home sales spark some risk taking and benefit the anti-dollars?

Yesterday, the spotlight was on US President Barack Obama as he signed the Health Care Reform Bill into law. The bill costs about $940 billion which is spread in 10 years. With an already large budget deficit, the passing of this law would weigh more on the USD.

Treasury Secretary Geithner also testified yesterday before the House Financial Services Committee. In his speech, he said that a lot of changes will be done with the government-sponsored enterprises Fannie Mae and Freddie Mac. These changes, once done, should promote the good mortgage underwriting standards to lessen the unfavorable effects of shocks in the country’s financial system.

On a separate note, the US’s existing home sales dipped to 5.02 million for a third month in a row from 5.05 million. This drop in the existing home sales raised some worries regarding the sustainability of the recovery of the US’s housing market.

At 12:30 pm GMT today, data regarding the US’s durable goods orders will be published. The headline durable goods orders are seen to have expanded by 0.8% in February on top of the 2.6% rise during the month prior. The core version of the account, which excludes transportation items, is also projected to gain by 0.6% following a 1.0% drop in January.

At 2:00 pm GMT, the US’s new home sales will also be on deck. New home sales in February are seen to be at annualized 318,000 units which is better than the 309,000 registered during the previous month. Given the drop in existing home sales, though, it’s possible for this account to log in a weaker-than-expected figure as well.

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The dollar was spotted flexing its muscles against other currencies in the foreign exchange markets yesterday. The US dollar index, which tracks the performance of the dollar relative to a basket of foreign currencies, went up to its highest level in 10 months.

The dollar’s strength mostly came from the news that Portugal’s credit rating was downgraded to AA- from AA by Fitch, a credit rating agency. There was also rumor going around that France and Germany could turn to the IMF to help bailout Greece.

Yesterday’s economic data were mixed.

The durable goods orders report for February showed only a 0.5% rise, lower than the 0.8% increase initially predicted. However, the core version of the report which excludes automobile and airplane orders climbed by 0.9%, higher than expected. Economists and analysts are saying that the monthly improvements in the manufacturing industry will continue to help drive the US economy to recovery.

In other news, the new home sales report revealed that the annualized number new single-family homes sold in February were only 308,000, marking the fourth straight month of decline.

On the docket today is the US weekly initial jobless claims (12:30 pm GMT) and a speech by Federal Reserve Chairman Ben Bernanke (2:00 pm GMT).

The report on initial jobless claims is predicted to show that 452,000 people claimed for unemployment insurance for the first time last week, which is slightly lower from the week before. Falling claims is typically associated with an improving labor market, because it indicates that less and less people are getting laid off.

Ben Bernanke’s speech would probably be the focus for today though, as he is set to speak about the Fed’s exit strategy with regards to all the stimulus measures they’ve implemented to support the economic recovery.

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Once again, the dollar cleaned up in yesterdays poker game… err trading sessions! The dollar rose against almost other majors. Will the winning streak continue as we end the week? Or will we some profit taking take place?

In a speech yesterday, US Fed President Ben Bernanke once again expressed concerned about the state of the US recovery. True to form, Bernanke showed a lot of caution, pointing to the weak labor and housing markets. Doesn’t this sound familiar? It should – we’ve been hearing it for the past 6 months now!

Also released yesterday were weekly unemployment claims figures. Claims fell from 456,000 to just 442,000 this week. This brought claims to its lowest level in 6 weeks. Still, this is pretty high and may take awhile before we can truly say that the labor market is improving.

Despite Bernanke’s cautiousness, we saw equities rise, as well as the commodity currencies hold their ground. It seems that more and more, the correlations between the currencies that held for the better part of the past year are breaking. Meanwhile, the yen, euro and pound are all now suffering from the fundamental problems of their economies. As long as those problems persist, the dollar could stand to benefit in the short run.

Today, at 8:30 pm GMT, we’ve got final GDP data on deck. No changes are expected, as GDP growth for last quarter is still expected to be at 5.9%. Meanwhile, the revised University of Michigan consumer index will also be available at 1:55 pm GMT. The index measures consumer confidence over the current and future economic outlook. Consensus is for a slight upward revision in the index, from 72.5 to 73.1

One thing to keep an ear out for is the EU summit that’s still taking place. Remember, a lot of the recent dollar strength has to do with weakness in the euro zone. If the euro zone shows more signs that they aren’t quite getting along, we could see a sell off in the EURUSD, which may actually lead to a rise in the dollar across the board.

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Screech! The greenback hit the brakes on its rally last week, allowing most majors to keep up. Still, the greenback outpaced the com-doll pack even though it lagged behind the euro, pound, and yen last Friday.

The US fourth quarter GDP was revised to 5.6%, down from the previously reported 5.9%. Investment, inventories, and financial services received downward revisions but still chalked up their best gains in almost six years. Meanwhile, the consumer sentiment index released by the University of Michigan was revised higher from 72.5 to 73.6, indicating that consumers’ economic outlook was better than initially announced.

Economic reports were scarce last week but this upcoming week would prove to be the exact opposite. The greenback gears up for an eventful week, starting off with the release of personal spending and personal income reports at 12:30 pm GMT. Personal income is projected to print another 0.1% uptick for February while personal spending is expected to post a 0.4% increase. Also due today is the core PCE price index, which is considered to be the Fed’s choice inflation indicator. It could report a 0.1% increase in prices of goods and services for February after staying flat in the previous month.

On Tuesday, the S&P house price index and the CB consumer confidence report will be released. Based on the consensus, house prices are still expected to decline in January but at a much slower pace than the 3.1% drop seen last December. The CB consumer confidence index is expected to climb back above the 50.0 mark, which indicates optimism, after dipping to 46.0 last February.

The ADP non-farm employment change and the factory orders report are due Wednesday. Net hiring is expected to increase by 38,000 in March after posting a drop of 20,000 in February. Could this foretell a positive NFP figure come Friday? Ohh, I can’t wait! Factory orders, on the other hand, could be less upbeat. Only a 0.5% increase is expected for February, down from the 1.7% growth seen in January.

Aside from the usual weekly jobless claims due Thursday, the ISM manufacturing PMI is also set for release. The index could climb from 56.5 to 57.0 in April, indicating that the industry’s expansion is still strong.

Come Friday, the much-awaited NFP report will be released. A total of 179,000 in net hiring is expected for March, a stark improvement over the 36,000 in net job losses reported in February. Would we really see a positive jobs figure this time? Stay tuned at 12:30 pm GMT on Friday!

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The greenback woke up yesterday on the wrong side of the bed as it got trumped by all of the other majors except the yen and the euro. The return of risk appetite led investors to buy up the high yielding currencies and to sell the USD.

News of a Greek bailout plan last Friday spilled over yesterday to bring a broad-based optimism in the markets. The jump in commodity prices later in the day also placed a lot of selling pressure on the USD. Crude oil, for one, closed with a 2.7% gain to $82.16 per barrel.

During the US session, data regarding the US’s core PCE index, personal spending and income for the month of February were issued. The core PCE index, which is the Fed’s preferred measure of inflation, came in flat at 0.0% versus an estimate of 0.1%. Personal spending in February also logged in a weaker gain of 0.3% against the market’s 0.4% estimate. Moreover, personal income likewise registered a zero growth during the same period. These weak inflation and income figures weighed more on the USD.

Later at 1:00 pm GMT, the US’s S&P/Case-Shiller Composite-20 Home Price Index will be on tap. The selling price of single-family homes in 20 major cities in the US is seen to have declined again by 0.6% on a year-over-year basis in January after already sliding by 3.1% in the month prior.

On a separate report, the CB consumer confidence index in March will be on deck. The index is projected to rise to 50.1 from 46.0. This jump in optimism could lead to some risk taking among the higher yielding assets. Such, however, could be bearish for the USD.

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The USD traded in a mixed fashion yesterday, gaining against the EUR, the CHF and the JPY, but lost out versus the GBP and the commodity-based currencies. Economic data that came out was likewise mixed.

The US’s S&P/Case-Shiller Composite-20 home price index came out slightly worse-than-expected, showing a 0.7% year-on-year in January. Meanwhile, the CB consumer confidence survey printed a reading of 52.5 for this month, better than the 50.1 initially expected and higher than the previous month’s revised up 46.5 reading.

The data to watch out for today is the ADP non-farm employment change (1:15 pm GMT) and the Chicago purchasing managers’ index (2:45 pm GMT).

The expectation for the ADP non-farm employment change is that net number of 40,000 people were hired in March, opposite the 20,000 job losses experienced in February. The ADP report is typically considered as a leading indicator of the NFP report coming out later in the week.

The Chicago purchasing managers’ index, which assesses whether business conditions in the Chicago area are improving or not, is predicted to print 61.5, roughly a point lower from the previous month’s reading.

With the current sentiment towards risk, we could see the USD get sold off if the results of the reports manage to beat forecast.

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The dollar cried uncle against its European counterparts, as it dropped like a hot potato against the euro and pound. Both the EURUSD and GBPUSD pairs rose almost 100 pips from their opening prices. The dollar did however, hold its own against the yen and other majors. Could we see more mixed results today?

Part of the reason why the dollar took a hit yesterday was because of the poor ADP figures that were released. The ADP report printed job losses of 23,000, after it was expected to print an increase in hiring of 40,000. Talk about missing the mark! This caused the dollar to take a hit against higher yielders, as it suggests that the NFP figures coming out on Friday may also miss its targets.

In other news, the Chicago PMI report printed a reading of 58.8, coming up short of consensus of a score of 61.5. This indicates that while business conditions in the Chicago area are improving, although not as good as in previous months.

We could see some strong moves once again tonight, as unemployment claims figures (12:30 pm GMT) and the ISM manufacturing PMI (2:00 pm GMT) are on deck.

Jobless claims are expected to be at 440,000, which would be in line with what came in the week before. If claims come in worse than expected, it may lower expectations from the NFP report once again…

The US may finally get some good news when the ISM manufacturing PMI comes in. The index is projected to have risen from 56.5 to 57.0 last month. This would indicate that business see more favorable economic conditions in the months to come.

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A positive NFP reading, whee! It was a Good Friday, Good Payrolls for the greenback indeed as my buddy Forex Gump pointed out. Although the greenback ended higher against most major currencies, its gains against the commodity-based currencies were limited.

Last Friday, the NFP report showed that a total of 162,000 workers were hired in March - its best reading in the past three years! The increase was led by a rise in private sector hiring, which climbed by 123,000 during the month. Well, the warmer spring weather seems to have thawed out the hiring freeze seen during the first two months of 2010. Still, the actual figure missed the consensus of 185,000 and the unemployment rate didn’t budge from 9.7%. Aside from that, underlying figures showed that average earnings per hour dropped in March as the number of people who couldn’t find full-time jobs settled for part-time work. But hey, a positive NFP figure was good enough to boost the greenback higher!

The greenback has quite a busy week ahead and it begs the question: Would it be able to keep up its recent rally?

For today, the US is set to release its ISM non-manufacturing PMI, which is expected to climb from 53.0 to 54.2 in March. Also due today is the pending home sales report for the month of February. After posting a massive 7.6% slide for January, a smaller decline of 0.6% is projected for February. Watch out for the actual figures at 2:00 pm GMT. Better than expected results could allow the greenback to add to its recent gains.

Come Tuesday, the minutes of the latest FOMC meeting are due. Note that the Fed has already implemented a discount rate hike and ended its asset purchase program. Would it make another hawkish monetary policy move this time? The US economy has shown plenty of improvements recently but then again, the Fed could stick to its cautious wait-and-see approach. Stay tuned for the minutes at 6:00 pm GMT then.

No economic reports are due on Wednesday but speeches from a couple of Fed officials, namely Big Ben Bernanke and FOMC member Thomas Hoenig, could impact the greenback’s price action. Still, if these speeches highlight the strength of the US economy, we might be in for a run of risk appetite as investors gather up enough courage to pursue higher-yielding assets.

The frenzy could die down towards the end of the week since the US has only the weekly unemployment claims on deck for Thursday. A total of 433,000 in jobless claims are expected for the week, a bit less than the 439,000 seen in the previous week. If the actual figure comes below expectations, it could throw the spotlight back on the improving trend in the labor market, allowing the greenback to push for more gains.

Fed Chairman Ben Bernanke is scheduled to deliver another speech on Friday although this could echo the same tone of his speech on Wednesday. No other economic reports are due from the US then.

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If the American Idol judges were to comment on the greenback’s performance yesterday, they’d probably say it was all over the place. The USD emerged stronger than the EUR, NZD, and CHF but had lackluster movement compared to the JPY, GBP, AUD, and CAD.

One possible reason behind the greenback’s unimpressive performance was the US Treasury’s decision to delay their currency report. Weren’t they supposed to declare China as a currency manipulator by mid-April? Apparently, Chinese President Hu Jintao is set to visit Washington this month and may still reach a compromise with the US in terms of the yuan’s valuation. Perhaps the mixed movement of the greenback reflected traders’ indecision amidst this looming currency war…

Meanwhile, US economic reports came in stronger than expected yesterday, allowing the greenback to push for some gains against some of the major currencies. The ISM non-manufacturing PMI climbed from 53.0 to 55.4 in March, indicating that growth in the services sector accelerated during the month. Also, the pending home sales report printed a whopping 8.2% increase instead of the projected 0.5% slide. This huge jump in pending home sales for February was most likely a result of an expanded tax credit program, which boosted demand in the housing market.

Up ahead, the FOMC minutes are set for release at 2:00 pm GMT today. As usual, the Fed could keep their cautiously optimistic stance in saying that more convincing signs of improvement are needed before they tighten their monetary policy. Still, upbeat comments from Fed Chairman Ben Bernanke could help lift the USD, giving it a more definite direction in today’s trading. Keep an eye out for that!

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For the second day in a row, the USD found itself trading mixed against other major currencies. The currency gained versus the EUR and CHF but weakened against the JPY and commodity-based currencies like the AUD, CAD and NZD.

Judging from the way the USD has been moving recently, it looks like the currency is still slightly supported by risk aversion stemming from Greece debt problems. Despite losing out last week, the USD has managed to regain almost all its lost ground against the EUR and CHF. At the same time, however, Australia’s relatively high interest rates and Canada’s rosier economic outlook has kept the USD weak against the AUD and the CAD.

Yesterday, the FOMC released its meeting minutes for its most recent interest rate decision. The minutes revealed that although consumer spending picked up during the first quarter of this year, the high level of unemployment and tight credit conditions put a serious drag on the pace of economic recovery. Furthermore, the minutes revealed that the “extended period” of low rates “might last for quite some time.”

No important economic data coming out from the US today so all eyes, or rather ears, will be on Federal Reserve Chairman Ben Bernanke at 5:30 pm GMT later. Big Ben is set to do a speech entitled “Economic Challenges: Past, Present, and Future.” With the bank’s $1.7 trillion purchase of mortgage-backed securities and US treasuries now over, what does Ben have in store for us?

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Your insight truly is quite useful. Thanks for sharing, & keep up the good work :slight_smile:

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Risk aversion took over in yesterday’s trading wars, allowing the USD bull troops to advance. The dollar rallied against most other higher yielding majors while falling versus the yen.

The spot light was on US Fed Chairman Ben Bernanke, who reflected the downbeat tone that the Fed expressed the day before. Bernanke once again pointed to unemployment, weak credit conditions and a struggling housing market. The recent pessimistic comments made by FOMC officials have dampened the optimism that the NFP figures brought last week.

This shouldn’t come as too much of a surprise – after all, throughout this recession, the Fed has notoriously stood still and has taken a cautious approach. Bernanke and his merry men are just waiting for more concrete signs of sustainable growth before they begin to tighten expansionary measures.

Speaking of tightening… Lone wolf Thomas Hoenig said yesterday that the Fed should look to raise interest rates to 1.0% sometime in the near future. In the past couple of meetings, Hoenig has dissented and said that the Fed should not keep interest rates at current levels. So far, no one else has quite joined his cause but if we do begin to see signs of rising inflation, Hoenig might just be able to swing other FOMC members to his side.

Up ahead, the only major data coming out today are weekly unemployment claims at 12:30 pm GMT. Once again, jobless claims are expected to top the 400,000 mark, with consensus being for 434,000 first time claims for last week. If claims do come in better than expected, it might just be the spark that traders need to satisfy their risk appetites.

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‘Twas another day of mixed trading for the greenback as it went up and down against the currencies in yesterday’s trading session. Risk aversion was the name of the game during the Asian session but the greenback eventually gave up its gains once the US trading session went underway.

As the scheduled release of the US Treasury’s currency report draws nearer, more traders are paying attention to the latest developments in the US-China currency debate. According to a report on a Chinese newspaper’s website, China is already considering widening the trading band of the yuan, allowing more leeway for fluctuations against the US dollar. Although a Chinese currency policy reform is probably in the works, many are still worried that the US could demand more exchange rate flexibility. As our resident economic guru Forex Gump pointed out in his recent entry, rising tensions between US and China could threaten the stability of the US dollar.

On top of that, the seemingly never-ending problems in Greece, this time involving the IMF aid package, kept risk appetite at bay.

On the economic front, the US weekly unemployment claims outpaced the consensus and landed at 460,000. Argh! Still, the US Labor Department was quick to point out that the worse than expected figure was affected by seasonality. After all, companies probably took a break from hiring during the recent Easter holidays. Continuing claims fell by 131,000 and amounted to 4.55 million, much less than the 5.84 million from the previous year.

That’s all for the US this week… in terms of economic reports, that is! Watch out for Fed Chairman Ben Bernanke’s speech at 12:30 am GMT today. His downbeat comments from earlier this week further fueled the run of risk aversion and, if he echoes the same pessimistic tone in today’s testimony, traders could keep flocking to the safe-haven US dollar.

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The US dollar had its walk of shame last Friday when it sunk against all of the other major currencies. Risk appetite made a comeback when news that finance officials in the euro zone have settled for a rescue package for Greece hit the airwaves.

Fed Chairman Bernanke, in a speech at the Center for the Study of the Presidency and Congress’ 43rd Annual Alexander Hamilton Awards Dinner, emphasized that having a stable financial system is critical for the economy’s growth. He also mentioned that the central bank’s decisive actions to increase the liquidity in the market prevented another depression from happening. He, however, refrained from saying any references regarding the bank’s outlook on the country’s economy and the bank’s future monetary policies.

The week will kick off with the publication of the US’s February trade balance and March import prices on Tuesday. The country’s trade deficit is seen to have expanded slightly to $38.4 billion from $37.3 billion. Import prices, on the other hand, likely gained by 0.9% in March after sliding by 0.3% in the month prior.

On Wednesday, the country’s March CPI and retail sales figures will be issued. The headline CPI is expected to be at 0.2% in March from 0.0% while the core version of the account is seen to have remained at 0.1%. The headline retail sales, on the other hand, are projected to have risen by 1.0% on top of the 0.3% during the previous month. Core retail sales, however, are only anticipated to have expanded by 0.5%. In any case, any in any of these accounts could spark some risk taking which ironically could sidetrack the USD.

Later that day, Fed Chairman Ben Bernanke will also testify regarding the Fed’s economic outlook before the Joint Economic Committee of Congress, in Washington DC. He would likely emphasize the recent improvements especially if latest retail sales show some positive results. Any hawkish tone, therefore, could fuel the market’s risk appetite. Such could be bearish for the dollar.

A bunch of economic reports namely the initial jobless claims, Empire State manufacturing index, TIC long-term purchases, capacity utilization rate and industrial production, and the Philadelphia manufacturing index are due on Thursday. Initial jobless claims for the week ending April 10 likely reached 439,000 which would be slightly better than the 460,000 claimants during the previous week. The empire state manufacturing index, on the one hand, is projected to have reached 24.0 from 22.9. Similarly, the Philly Fed index is seen to have reached 19.7 from 18.9 as well. Lastly, the capacity utilization rate in March is anticipated to have improved to 73.3% from 72.7% given the expected 0.5% jump in industrial production.

On Friday, data regarding the US’s housing starts and building permits, and the University of Michigan (UoM) consumer sentiment will be published. Housing starts and building permits in March are seen to have printed scores of 600,000 and 630,000, respectively. The preliminary UoM consumer sentiment for April is also seen to tally a better mark of 74.7 from March’s 73.6. Improvements in these accounts could be bearish for the USD given the investors preference for higher yielding assets.

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After largely gapping down against most major currencies yesterday, the greenback was able to find some buyers as the day rolled along. Are the effects of the joint International Monetary Fund/European Union bailout package over the weekend finally fading? Or are bears simply revving up for another major dollar sell-off?

It seems that the greenback’s price action has mostly been driven by risk sentiment flows. I can’t help but wonder how news of bailing out of an entire country be good news… Furthermore, it isn’t only Greece that’s experiencing deficit problems, but other euro zone nations like Portugal, Spain, Ireland, Italy are having them too! In any case, risk appetite is king for now, but for how long… Well, we just have to wait and see.

The US economic calendar presents no red flags today, but do expect to see both the country’s trade balance and import price index at 12:30 pm GMT.

The trade balance, which measures the net difference in value between exported and imported goods, is predicted to show a $39 billion deficit for the month of February. The trade balance deficit in January stood at $37.3 billion. Since rising deficits are generally considered bearish for the domestic currency, we could see a slight dollar sell-off if the actual deficit comes in higher than expected.

Meanwhile, the import price index is anticipated to print a rise of 0.9% in prices in March, opposite the 0.3% decline seen the month before. The import price index is usually used as a leading indicator of inflation, because importers tend to pass on additional costs they incur to their customers.

Again, the economic calendar presents nothing major so we could see some range bound in today’s trading session.

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With no major catalysts to provide a nice rhythm to dance to, the currency markets pretty much stayed in a two step. The EURUSD ended up closing near its opening, to finish at 1.3587. With more high impact data on deck today, could we finally see more convincing directional moves?

It looks like demand is picking up in the US, as trade deficit figures came in higher than anticipated, posting a negative trade balance of $39.7 billion, up from $37 billion in February. The deficit was greater than the projected figure of $39 billion. Much of this was attributed to a pickup in orders for TVs and computers, suggesting that demand is picking up in the US.

Still, some suggest that this could be the peak of the deficit, as foreign demand is starting to pick up as well. As foreign demand picks up, this should lead to an increase in orders for American exports, which will beneficial to the US economy down the line.

We could be in for quite a ruckus today, as we’ve got quite a couple red flags going up the flag pole. First, we’ve got inflation and retail sales figures coming out at 12:30 am GMT. The core CPI is expected to print an increase in consumer prices of 0.1% during the month of March. Watch out though, for any surprising figures that show prices are rising faster than expected. A spike in an increase of consumer prices could lead to speculation that the Fed will raise interest rates sooner than anticipated.

Meanwhile, retail sales are expected to have risen by 1.1% last March, with core sales (which doesn’t include automobile purchases) is seen to have risen by 0.5%. Seeing as how demand seems to have picked up and with the recent good news in the labor market, could we be in line for some inflated retail sales figures? If we do, we may just see those dollar bulls lock in those horns and rampage through the markets!

Also, watch out for Big Ben Bernanke’s speech at 2:00 pm GMT. He’ll be speaking at the Joint Economic Committee of Congress, where he’ll be subject to some impromptu questioning from Congress. If Bernanke isn’t prepared, he may just drop some comments that could lead to some exaggerated volatility – so be careful!

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Despite stronger than expected US retail sales figures, the greenback weakened against most major currencies in yesterday’s trading. Even their inflation reports, which came closely in line with expectations, failed to boost the greenback’s morale.

Blame it on Big Ben’s overly cautious comments in his speech yesterday. The central bank head seemed to dismiss all the recent improvements in the US economy, reiterating that it will still take a long while before the Fed hikes interest rates. He is expecting a moderate recovery, which could be restrained by high unemployment. Wait a minute… Didn’t we just see a largely positive non-farm payrolls figure lately? Well, it seems like the Fed Chairman is waiting for more signs of a sustainable pickup in jobs before whistling a more upbeat tune.

Traders seemed to be disappointed with these statements from Big Ben, leaving the greenback unable to bank from the upside surprise in consumer spending. Retail sales reportedly grew by 1.6% in March, outpacing the forecast of 1.1% growth. Core retail sales also came in better than consensus, posting a 0.6% uptick.

Meanwhile, the CPI report showed that price levels rose by a measly 0.1% in March while core price levels stayed flat during the month. The rise in the headline figure was spurred by a sudden increase in prices of fruits and vegetables right after the severe snowstorms in the US depleted the supply of these commodities. Still, just as Forex Gump pointed out in his latest entry, inflation remains subdued as expected.

The US has quite a busy day ahead in terms of economic releases. Aside from the usual weekly unemployment claims, which could land at 439K this week, the US is set to release the Empire State manufacturing index at 12:30 pm GMT. The index could climb from 22.9 to 24.0 this month, reflecting how manufacturing conditions continue to improve in New York.

Also due today is the Treasury International Capital long-term purchases report, which measures the net foreign purchases of US Treasuries. In other words, this report gauges the international demand for US securities. In January, purchases amounted to $19.1 billion and this figure is expected to double this February. Watch out for the actual figure at 1:00 pm GMT.

Later on, the US will release its capacity utilization and industrial production report at 1:15 pm GMT. Industrial production for March is expecting a 0.6% uptick as capacity utilization climbs from 72.7% to 73.3% during the month. By 2:00 pm GMT, the Philadelphia Fed manufacturing index will be released. Just like the Empire State index, the Philly Fed index could also rise in March.

Whew! That’s a lot of figures due today! With that, watch out for possible wild price swings since these top-tier reports could carry the greenback to and fro. Also keep an eye out for the release of China’s economic reports, particularly its quarterly GDP, since these could impact risk sentiment. Be careful out there!

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The USD had a nice little break as it rallied yesterday against all of the other majors except the GBP and JPY. Will the USD be able to build on its momentum to end the week on a positive note?

Data that came out of the US yesterday were mixed. Initial jobless claims for the week ending April 10 were at 484,000, up from the 460,000 that was logged during the previous week and from the 439,000 consensus. Continuing claims for the week ending April 3 were also up more than expected to 4.639 million against the 4.583 million estimate.

Capacity utilization in March was down by a hair to 73.2% while industrial production also tapered to 0.1% after gaining by 0.3% during the previous period. The Treasury International Capital (TIC) long term purchases, on the other hand, came in better at $47.1 billion in February.

Meanwhile, both Empire State manufacturing index and Philadelphia Fed manufacturing index tallied some better than projected scores of 31.9 and 20.2, respectively.

Despite the mixed data, the US equities markets still managed to find support due to the stellar corporate earnings from UPS, AMD, and Intel. The dollar, however, took its cue from the data that was mentioned above.

Today (12:30 pm GMT), the US’s housing starts and building permits in March will be reported. Housing starts are seen to be at 600,000 while building permits likely reached 630,000.

The preliminary University of Michigan consumer sentiment index in April will also be due at 1:55 pm GMT. The index is projected to reach 74.7 from 73.6. An increase in this account means that confidence among consumers and investors in the market is building up. A better score could once again spur some risk taking which unfortunately could be bearish for the USD.

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Due to the wave of risk aversion that hit the market last Friday, the dollar was able to rise against most major currencies. The US dollar index, which tracks the performance of the greenback versus a fixed basket of currencies, closed out at 81.23, more than one percent higher from its open.

Last Friday, the reports on building permits and housing starts both came out better-than-expected. The annualized number of new building permits soared to 690,000 while housing starts rose to 630,000 in March. February’s figure was also revised higher to 640,000 and 620,000, respectively.

Meanwhile, the University of Michigan consumer sentiment survey for the month printed a reading of 69.5, significantly lower than the 74.7 forecast. Last month’s reading, however, was revised up to 73.6 from 72.5.

The economic reports released mostly took a backseat though, as rumor broke out that financial giant Goldman Sachs allegedly misled investors by not disclosing that its Collateralized Debt Obligations (CDO’s) were primarily backed by sub-prime mortgages. Of course, Goldman Sachs denied the accusation but, as we all know by now, that didn’t matter much to the market. Investors sought the safety of the dollar on the news.
US’s economic calendar this week presents no red flags, but do keep an eye out of the results of the producer price index, weekly unemployment claims, existing home sales and durable goods orders. These reports usually garner a lot of attention from currency traders, and could push the dollar higher on account of risk aversion if they come out worse than expected.