Daily Economic Commentary: United States

Trading Discussion News and Economy
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After all the excitement last Friday, yesterday’s trading matches provided more range like movement. This came as no surprise, as there were no major developments regarding the Goldman Sachs issue nor was there any major economic data released yesterday.

Once again, there’s no major economic reports coming out today, but that doesn’t mean we can take a break and go surfing along Malibu beach. US Fed Big Boss Ben Bernanke will be testifying alongside good buddy Treasury Secretary Tim Geithner about Lehman Brothers in Washington. This should be interesting, as chances are, the recent civil case about Goldman Sachs will be brought up.

Could this cause a ruckus in the markets? Well, it did last Friday! If the two hotshots make any comments that indicate that there could be more cases similar to Goldman Sachs, it might just lead to another run of risk aversion. Make sure you take a look at Forex Gump’s recent post about this issue for more insight.

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Mixed trading for the dollar yesterday, as it fell against the pound but posted gains against the euro and yen. Hmmmm… dollar gaining versus the yen? Is risk appetite back in town?

“It seems that even the words of US Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner were not enough to rock the markets during the US session as they kept their comments to Lehman Brothers and the measures they could have taken to avoid a similar crisis down the road.” So, neither of the dynamic duo made any “out of this world” comments and it was reflected in USD price action with a lack of broad market volatility.”

No major data on deck today. I suggest that you take note of trading in the equity markets, as any big moves in those markets could be indicative of risk sentiment.

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Yesterday turned out to be a snooze fest for the dollar as it just traded in a mixed fashion. Given yesterday’s flat trading, is the greenback poised for some big movements today? In case volatility increases, which way will the greenback go?

No major economic data were issued yesterday in the US. The only notable report that came out was the unveiling of the new $100 dollar bill. A new $100 dollar bill with new design and security features was made public by US Treasury Secretary Tim Geithner and Fed Chairman Ben Bernanke. The new design and features are aimed to thwart counterfeiters. The new bills, though, will be circulated February next year. So if you’re interested in seeing the bill’s fresh look, kindly click here.

Today (12:30 pm GMT), the US’s PPI data for the month of March is due. The headline PPI is seen to have risen by 0.4% after sliding by 0.6% during the month prior. The core version of the index, however, is just expected to remain the same at 0.1%. An increase in input prices is usually reflected in the country’s inflation since most of it is transferred to consumers. A hike in PPI, therefore, is generally bullish for the USD.

The initial jobless claims for the week ending April 17 will also be on deck later. Initial jobless claims for the week are forecasted to be at 452,000 which is a little better than the 484,000 that was tallied during the previous week.

At 2:00 pm GMT, the US’s March existing home sales will also be on tap. Existing home sales for the month are projected to be at 5.28 million which is better than the 5.02 million that was sold in February. An increase in sales could spark some risk taking which ironically is bearish for the greenback.

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The US dollar found itself trading higher against most major currencies yesterday when some more bad about Greece’s fiscal condition hit the airwaves. Eurostat, an institution which provides the euro zone with statistical information, revealed announced that Greece’s deficit could hit around 14% of its GDP by the end of this year instead of 12.7% like initially predicted.

Some of the economic data released from the US yesterday also came in better than expected, which helped the US dollar maintain its gains.

The PPI, which is an index of changes in wholesale prices, showed a jump of 0.7%, higher than the expected 0.4% rise. Meanwhile, the version of the index that excludes food and energy prices was in line with consensus and showed a 0.1% increase. The PPI is typically used as a leading indicator of inflation, as businesses tend to pass on additional costs they incur to their customers.

The existing home sales report shared the same positive tone, revealing that the annualized number of previously used homes sold in March amounted to 5.35 million. The figure seen in February stood only at 5.01 million, while the forecast for only for 5.28 million.

Lastly, the initial jobless claims for the week ending April 17 came in mostly in line with expectations as it reported a figure of 456,000, just a couple of thousands higher than forecast. Even if the reported figure was below forecast, it was still better than last week’s 480,000 claims.

The important reports to watch out for today is the core durable goods orders (at 12:30 pm GMT) and the new home sales report (at 2:00 pm GMT).

The expectation for the core durable goods orders report is a rise of 0.7%, which is half the pace of increase the previous reporting period. New home sales, on the other hand, are predicted to have grown to 326,000 in March from 308,000 the month before.

Judging from the effect of the news on price action yesterday, we could see the dollar rally on better-than-expected data instead of the usual risk aversion flows.

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Friday’s trading session bought mixed results for the dollar , as it zoomed ahead against the yen, but gave up much of its gains against the euro. With some high impact reports on deck this week, what could be in store for the currency markets?

It look like the US got some good news last Friday, as durable goods orders and new home sales figures came in to beat consensus. Core durable goods order rose a crazy 2.8% marking the highest increase in core orders in almost 3 years! This indicates that consumers are ready to spend on those longer lasting goods like fridges. Take note though, that the headline figure fell by 1.3%, as demand for aircraft goods fell by 67%.

Meanwhile, the annualized pace of new home sales rose to 411,000 after consensus was for a pace of just 326,000! This marked a rise of over 25% - yowza! However, I’ve got a feeling that this sudden surge was merely because home buyers availed of tax credit incentives that were set to expire last month.

Still, this set of positive news is significant, as the FOMC will be releasing a statement later this week. Word on the grapevine is that the Fed is considering selling some of its mortgage backed securities sometime in the latter part of this year. This would effectively mean that the Fed is looking to tighten their quantitative easing measures.

With the recent run of good data, could we see some hawkish comments by Fed Governor Ben Bernanke? The markets will be clinging to every word made during the statement, as we all know what hawkish comments may lead to – potential interest rate hikes!

It looks like the economic cupboard is empty today, so we may see more range like trading. Be on the look out though, for surprise news regarding Greece or Goldman Sachs. While things have died down a little bit regarding these two issues, I believe that they are still at the back of traders minds, and any mention of the those issues might just spark another run of risk aversion.

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With an empty economic calendar, the greenback was unable to pick a definite direction yesterday. Uncertainties surrounding the Greek bailout, the Goldman Sachs investigation, and the upcoming FOMC report allowed the greenback to gain against most major currencies.

The US Senate’s investigation on the Goldman Sachs fraud issue revealed that the firm has been betting against its own securities way back since 2007. Yikes! This would imply a huge conflict of interest that has been going on for the past three years. Goldman Sachs CEO Lloyd Blankfein is due to testify today and deny such allegations. Traders are probably on their toes awaiting developments on this issue since these could have an impact on investor and consumer sentiment in the US.

Speaking of consumers, the CB consumer confidence index is set for release at 2:00 pm GMT today. The index is expected to climb from 52.5 to 53.6, reflecting an improvement in sentiment. Also due today is the S&P housing price index, which could post a 1.4% annual increase in house prices for February. If the actual figure meets the consensus, it would chalk up a nice rebound over the 0.7% decline in house prices seen last January. Watch out for the release at 1:00 pm GMT.

Later on, Fed Chairman Ben Bernanke is scheduled to deliver a speech on fiscal stability. Keep your ears open for his remarks concerning the ongoing Goldman Sachs investigation and for possible hints on the central bank’s monetary policy moves. With the FOMC statement due tomorrow, his testimony could provide a bit of a preview. Stay tuned at 2:00 pm GMT!

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Jackpot! The dollar bulls were partying like rock stars yesterday as the greenback staged a huge rally across the board with the exception of the yen. A massive wave of risk aversion in the financial markets sent the dollar soaring by about 200 pips against the pound and euro.

News that the credit ratings of Greece and Portugal were downgraded by Standard & Poor’s sent the investors running towards the safety of the dollar and yen. According to the IMF, it would have to extend its aid by another €10 billion to Greece for it to service its dues on time and it would have to borrow more for the next couple of years to finance their upcoming obligations. This prompted the S&P to lower their credit rating to junk. For awhile now, we’ve been hearing about Greece’s problems. While not surprising at all, Portugal’s debt downgrade added another crushing blow to the market’s already fragile confidence.

In the US, the Conference Board’s consumer confidence index rose more than expected to 57.9 from 52.3, its highest level in more than a year. The improvement in employment in the last couple of months erased some of the pessimism of the market. This, however, did not stop yesterday’s bloodbath as investors continued to sell the higher yielding assets and currencies in exchange for the safer ones like the dollar.

Today, the FOMC will issue its interest rate decision at 6:15 pm GMT. During their last meeting, the FOMC maintained its rhetoric of keeping its interest rate unchanged for an “extended period.” Will we hear the same story in today’s issue? Stay tuned!

By the way, my friend, Forex Gump, wrote an article regarding the Fed’s upcoming monetary policy decision. Kindly check it here.

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The dollar was unable to find a clear direction in yesterday. The dollar ended the day higher against the pound and the yen but slightly lower versus the comdolls and the euro.

The only important piece of news that came out yesterday was the FOMC’s interest rate announcement. As widely expected, the FOMC decided to keep rates steady at the 0.00%-0.25% band going with their good ol’ wait-and-see stance. It seems that the FOMC will need a couple of more quarters of strong economic growth before lifting rates. If I were you, I’d keep a close eye on labor market, as improvements in this sector could help the FOMC drop its “extended period” language.

For today, the important economic data to watch out for from the US is the weekly initial jobless claims report at 12:30 pm GMT. The expectation is that 442,000 people claimed jobless insurance for the first time for the in April 24. Judging from how risk sentiment and euro zone debt concerns have been driving price action, I suspect that we could see the dollar get sold-off if the report comes in lower than predicted.

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Looks like risk appetite came back, as even the euro and pound posted decent gains versus the dollar yesterday. With it being a Friday, could we see the dollar continue to fall? Or will it end the week with a bang?

Unemployment claims figures came in slightly worse than expected, as 448,000 people filed for jobless insurance for the first time last week. It was projected that claims would come in at 442,000. Still, this didn’t cause too much of a ruckus in the markets, as continuing claims remained steady at 4.65 million.

We could be in for some fireworks today as we’ve got GDP data on deck at 12:30 pm GMT (key in dramatic music…). Word on the street is that GDP grew by a measly 3.4% on an annualized basis last quarter. I saw measly because during the last quarter of 2009, the US economy grew by 5.7%! Not exactly a step towards improvement right? But hey, I suppose positive growth is positive growth.

If the report prints a better than anticipate result, we may just see higher yielders rise against based on increased risk appetite. Besides, com-dolls (like the AUD and CAD) have remained strong against the dollar, while we didn’t see too much of a sell-off in the euro even though Spain got downgraded two days ago. No more sellers perhaps? Maybe all buyers need to jump back in is a little bit of good news…

Other reports that are due today are the Chicago purchasing managers index (1:45 pm GMT) and the revised Univeristy of Michigan consumer sentiment index (1:55 pm GMT). The Chicago PMI measures business conditions by surveying business managers in the Chicago area. The index is projected to print a reading of 60.0, up from the 58.8 printed last month.

Meanwhile, the consumer sentiment index is expected to see an upward revision from 69.5 to 71.2. It’ll be interesting to see whether consumers have indeed become more optimistic over the economy, especially after all Goldman Sachs news that came out a couple of weeks back.

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After starting last week on a solid note, the dollar gave back some of its gains as risk appetite seemed to trickle back into the markets. Will more news of downgrades spark another run to safety? Or are there just no more sellers in the market to push higher yielding currencies lower versus the dollar?

The US got some mixed news last Friday, as GDP figures came in slightly worse than anticipated. The economy grew by just 3.2% this past quarter, failing to meet consensus of a 3.4% rise and down from the previous quarter’s revised pace of 5.6%. Before you start groaning, take note that there was some good news, as consumer spending rose by 3.6%, higher than expert’s forecast of 3.1%.

This is good news because it suggests that consumer spending is picking up and supporting economic recovery. The downtick in the overall GDP figure was probably caused by less spending by the government. Remember, some of Uncle Sam’s stimulus programs have come to an end, so it was inevitable that growth would take a slight hit. Considering that labor conditions seem to be improving, we may just see upward revisions in GDP releases later this month and in June.

In other news, the Chicago purchasing managers’ index and the University of Michigan consumer sentiment index both came in to beat forecasts. The Chicago PMI posted a score of 63.8, beating predictions of a reading of 60.0. Meanwhile, the consumer sentiment report was revised to have a score of 72.2, up from the previous month’s release of 69.5. I guess consumers really are becoming more confident over the state of the economy!

Looking at today’s [=&currency[]=CHF&currency[]=USD&importance[]=&importance[]=3&importance[]=2&importance[]=1&submit=Submit"]economic calendar](Forex Economic Calendar[), we’ve got more consumer spending and inflation data on deck, as well as the ISM manufacturing purchasing managers’ index scheduled for release.

At 1:30 pm GMT, monthly personal spending figures will be available. After checking out some malls and supermarkets, it seems that personal consumption has risen by 0.7% in March, up from 0.3% in February. Seeing as how consumer spending figures came in to beat forecasts last week, could we be in line for an upside surprise in today’s report?

Meanwhile, the core personal consumption expenditure price index report is expected to show that inflation has remained flat yet again. Remember, this is the preferred measure of inflation by the Fed. If we see any indication that inflation is rising faster than anticipated, it might spark speculation that the central bank may just hike interest rates sooner.

Lastly, the red flag that is the ISM manufacturing PMI report goes up at 3:00 pm GMT. The index measures how purchasing managers around the country feel about the state of the economy. Early estimates are that the index will fail to meet last month’s reading of 59.6 and post a score of 59.0. If we see a bigger than anticipated drop, it might just dampen optimism toward the dollar.

Phew, that was a long one. To recap – GDP came in slightly worse than expected, but consumers seem to be spending more. Meanwhile, both consumers and purchasing managers seem to be more optimistic about the economy. We could get more clues if this is true or not when the ISM PMI report and more spending data come out.

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Strong US economic reports boosted demand for the USD yesterday, allowing it to score gains against the JPY, EUR, GBP, and CHF. The com-doll gang (AUD, CAD, NZD) stayed resilient and refused to give up their recent gains.

Yesterday, the US released its core PCE price index, which showed a 0.1% uptick instead of staying flat in March. Since this is the Fed’s preferred measure of inflation, the stronger than expected result could mean that the Fed is a step closer to hiking rates. I’m crossing my fingers that they’d ditch the “extended period of low rates” phrase soon!

On top of that, other improvements were reported in the US economy. The ISM manufacturing PMI, which accounts for the assessment and outlook for the manufacturing industry, also outpaced the consensus. The index climbed from 59.6 to 60.4 in April, chalking up a faster than expected pace of expansion during the month.

Lastly, personal spending and personal income also rose in March, posting 0.6% and 0.3% upticks respectively. Although both these reports came in slightly lower than consensus, they still showed improvements over February’s figures. In fact, analysts noted that these reports showed that consumer spending is back at its pre-recession levels. Hmm, more reason for the Fed to hike rates soon?

Up ahead, the US is set to release its pending home sales report and data on factory orders today. Pending home sales could be up by 3.9% in March, a much lower pace of growth compared to the 8.2% increase seen in February. Meanwhile, factory orders are expected to stay flat in February after posting a 0.6% rise in the previous month. Worse than expected figures could force the greenback to return its recent gains so stay tuned for the actual release at 2:00 pm GMT.

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“I wanna be a dollar billionaire soooo freaking bad,” sang the dollar bulls as they clocked in their second consecutive day of winning yesterday. The US dollar index, which tracks the performance of the dollar against a basket of other major currencies, is currently above the 84.00, marking its highest reading this year.

It seems like currency traders remain doubtful that the huge €110 billion aid package for Greece will be enough to stop the spread of the debt contagion. This triggered a wave of risk aversion, which caused traders seek safety in the dollar. I don’t know about you, but this is looking more and more like repulsion to the euro than good ol’ risk aversion.

Positive data released from the US yesterday also gave the bulls more reason to take the dollar higher. The pending home sales report revealed that sales jumped 5.3% in March, higher than the 3.9% rise initially predicted. Meanwhile, factory orders covering the same period rose 1.3%.

Two important pieces of data will come out today.

First is the ADP’s version of the non-farm employment change at 12:15 pm GMT. The ADP’s report, which is typically considered as a leading indicator of the upcoming US non-farm payrolls on Friday, is predicted to show that 30,000 net jobs were created in April, opposite the 23,000 lay-offs seen the month before.

Second is the ISM non-manufacturing purchasing manager’s index at 2:00 pm GMT. It is predicted to print a reading of 56.1 for the month of April, which is slightly higher than the 55.4 reading seen in March.

With the positive expectations on the data coming out later, will we continue to see the dollar be bought up? Will the US’s better growth outlook continue to weigh heavily on the euro? I guess we’ll all just have to wait and see later!

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Looks like fear is taking its toll on the market place, as the dollar gained yet again in yesterdays trading session. The dollar took on the role of Mario, squashing all other Goombas, err, I mean major currencies except for the yen, who has been playing the role of Luigi in this risk aversion stage.

Once again, risk aversion was the name of the game, with traders looking to unwind their risky positions in favor of the dollar. The cause? You guessed it – euro zone debt issues! The drop in the EURUSD has caused widespread dollar strength, and unless something drastic changes, this could be a recurring theme throughout the summer.

Let me point out that the dollar isn’t only benefiting from euro weakness, but it is also getting a boost from improvements in the US economy. The ADP employment report showed that 32,000 jobs were added to the economy last month, beating estimates of a 30,000 increase. This marked the third consecutive month of jobs increases. Furthermore, the previous month’s release was revised up 19,000! Yahoo! It looks like the labor market is leveling up! Could this be a signal that we should expect some nice figures when the NFP report is released this Friday?

In other news, the ISM non-manufacturing PMI failed to hit analysts target score of a 56.1 for April. Still, the index posted a reading of 55.4, which means that service industries are still growing at the same pace in March. One thing to note is that the employment component of the index hovered around the 50.0 mark, which indicates that companies may start hiring soon. Yowza – more good news for the labor market!

Tonight, we get another dose of labor data, as jobless claims are due at 12:30 pm GMT. Unemployment claims are expected to hover around 440,000 once again. Considering the improvements in the labor market as of late, could we be in for an upside surprise? Now, I don’t have a forex crystal ball like Pipstradamus – I’m just putting it out there. If we do see better than anticipated results, it may just spur another round of dollar buying.

Before I forget, don’t forget to set your alarm for 1:30 pm GMT, as US Fed Chairman Ben Bernanke will be delivering a speech at the 46th Annual Conference on Bank Structure and Competition. As a currency trader, you should always be aware of when Bernanke is speaking, cause even one lil’ comment about interest rates or monetary policy could set the markets on fire.

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“Dark and difficult times lie ahead,” muttered Professor Dumbledore to Harry Potter yesterday as they watched the VIX surge once again. As fears of another financial meltdown intensified, investors sought safety in the US dollar.

Almost everyone was caught off guard when the Dow Jones Industrial Average, a US stock market index, suddenly plummeted by close to 1000 points. I could imagine the scene in Wall Street yesterday was very much like N.E.R.D.'s “Sooner or Later” music video. Many investors freaked out, triggering a domino effect which caused other major stock indices to drop as well.

The root of all this chaos? An “unusual trading activity” by Citigroup! Although this issue is still under review by the Securities and Exchange Commission, word on the street is that Citigroup accidentally traded $16 billion instead of $16 million and sparked the huge sell-off. However, the Chicago Mercantile Exchange dismissed this rumor and said that it was probably just a temporary technical glitch that caused the sudden drop in equities.

Needless to say, this unexpected event gave investors more reasons to be worried. Debt contagion woes have been weighing down on investors’ confidence recently and yesterday’s drop in equities forced them to let go of their risky holdings and run to the safe-haven US dollar.

In the midst of all these crazy happenings, recent economic reports seem to have gotten upstaged. Allow me to turn the spotlight back on them…

Whoa! The non-farm payrolls report is due today?! With all the fast-paced goings-on this week, the much-awaited US labor report just seems to sneak up on ya from nowhere… Good thing my buddy Forex Gump was nice enough to make a preview for this top-tier economic report. Another positive reading is expected for the month of April, possibly confirming that the US labor market is slowly getting back on its feet. Still, I can’t help but ignore how labor productivity rose more than expected in the first quarter of 2010. This could mean that employers could be less aggressive with their hiring later on. But will a strong non-farm payrolls figure be able to boost investors’ confidence? Stay tuned for the actual results at 12:30 pm GMT.

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It looks like conflicting results on the US employment report sent the dollar to the dog shed last Friday! After hitting a high of 85.76 the day before, the US dollar index, which tracks the performance of the dollar against a basket of other major currencies, closed out Friday at 84.86

Even though 290,000 net jobs were added in April, the employment report showed that the unemployment rate actually rose to 9.9%, higher than the initially predicted 9.7%. It seems that the number of people who entered the labor force overshadowed the amount of jobs created. I guess we’ll just have to see in the next couple of months whether the US labor market can keep up with the continued arrival of job seekers now that the government’s stimulus programs are starting to expire

There are two red flags on the US economic calendar this week, both of which we will see on Friday.

The first one comes in the form of the advance retail sales report. The report, which measures the monthly increase or decrease of sales in the retail level, is expected to show a 0.5% climb in April, almost a third of the 1.6% increase seen the previous month. Meanwhile, the version that excludes automobile sales is predicted to show a 0.6% rise.

The second one is the preliminary University of Michigan consumer sentiment survey for the month of May. A reading of 73.5 is the consensus on this one, which is a better than April’s 72.2. The survey has missed consensus for the last four months, and if the same happens on Friday, we could see the dollar be bought up again on account of risk aversion.

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After increased risk appetite pushed the dollar lower versus higher yielding currencies, it seems that the risk aversion mist hasn’t quite left the markets just yet. Despite gapping 150 pips higher to start the week and hitting an intraday high of 1.3094, the pair gave back all of its gains and filled the weekend gap.

Upon hearing that the EU and IMF would be coming up with a trillion dollar bailout for the euro zone, the markets went buck wild, with equities on both sides of the Atlantic shooting higher. This run of risk appetite however, was somewhat tempered in the currency markets. There seems to be a lot of concern about what this bailout plan will actually mean for the euro zone. Some feel that while it may solve the short term debt issues that are plaguing the euro zone, it may lead to even more debt problems down the road.

With no red flags being raised over the next few days, all eyes will be trained on any developments of this bailout package. After all, this could either make or break the euro zone – literally! If we continue to see more uncertainty regarding the plan, we could see the dollar continue to benefit as traders unwind their positions in euro denominated assets.

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It was an unusually quiet day in the currency market yesterday but the greenback managed to sneak in some gains against the euro. Still, risk aversion seems to be waiting in the wings as doubts over euro zone’s massive rescue plan started to emerge.

With hardly any high-impact US economic reports on yesterday’s agenda, price action seemed to cool off as traders mulled over the implications of the new bailout plan from the euro zone. Just like my buddy Forex Gump, many still seemed to doubt that this financial stabilization package could put an end to the euro zone’s debt problems. As a result, the EURUSD pair slid to a low of 1.2666 before closing out at 1.2742.

The only top-tier report on the US economic calendar is its trade balance for March. The trade deficit is expected to widen from 39.7 billion USD to 40.0 billion USD during the month. Although this report could take the backseat, considering how traders seem to be more focused on the goings-on in the euro zone, keep an eye out for the actual results due 12:30 pm GMT.

Later on, a couple of Fed officials are set to testify about the US financial status. FOMC member Eric Rosengren is set to participate in a panel discussion entitled “Up from the Ashes: The Financial System After the Crisis” at 2:15 pm GMT while Federal Reserve Bank of St Louis President James Bullard would deliver a speech at 5:15 pm GMT. Stay tuned for possible hints on the Fed’s future monetary policy moves.

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For the second day in a row, the US dollar found itself trading in a mixed fashion against other major currencies. While the pound and the euro struggled to hold their ground, the commodity-based dollars like the Loonie, Aussie and the Kiwi, ended the US trading session barely changed.

The almost perfect forecast on the US trade balance released yesterday also kept major one-directional moves at bay. The trade balance revealed that the country experienced a 40.4 billion USD deficit in March, just a couple of millions above the 40.0 billion USD deficit initially predicted.

There was something different that happened in yesterday’s trading session that made it stand out though. Apparently, gold staged a spectacular rally yesterday and ran past through its all-time high of $1,126 and yet, the commodity-dollars refused to budge! Meanwhile, the US dollar remained mostly steady, and even posted some gains on the euro and the pound!

Whoa, hold on a minute there! Isn’t the gold prices and the value of the US dollar inversely correlated? Hah, it looks like investors and traders everywhere are putting their bets on this shiny metal with all these uncertainty going around.

Today, the important piece of data to keep an eye out for is the initial jobless claims at 12:30 pm GMT. The report, which measures the total number of people who claimed for unemployment insurance for the week ending in May 8, is expected to decline to 440,000 from 444,000 the week prior. Decreasing unemployment claims is considered as bullish for the domestic currency, because it could mean that unemployment is also subsiding. Given this, we could see the dollar could rally later if claims are lower than expected and fall if claims come in higher.

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Risk aversion is back baby! Once again, the dollar bulls made a killing across the board, posting gains against most other major currencies. With it being a Friday, could we see some profit taking? Or will the dollar remain king?

Euro zone fears dominated the news once again, as concerns regarding that the bailout package resurfaced its ugly head into the markets. Traders remain uncertain as to how this will affect the euro zone in the long term, which is why they are dumping the euro in favor for the dollar. With all these strong currency flows, the dollar has benefited as of late.

In other news, unemployment claims came in line with expectations, as 440,000 people filed for jobless insurance last week. Jobless claims have been hovering around this level for some time now, and if it continues, it may signal further weakness in the US labor market.

I took a look at today’s economic calendar and it looks like we may be in for douzy! How come? We’ve got retail sales figures due at 12:30 pm GMT! Word on the street is that retail sales only rose by 0.5% in April, after growing by 1.6% in March. Considering that there was the Easter holiday at the end of March, a dip in spending shouldn’t be too surprising.

Wait, don’t go yet – there’s more! The University of Michigan consumer confidence index will be the economic after party! Early estimates are forecasting that the index rose from a revised 72.2 to 73.5, which would mean that consumers are more optimistic over the economy.

I’m interested to see how the markets react to these news report. Given all the debt contagion fears around Europe and the rise in the VIX as of late, is the American public really more confident and spending more? If we see worse than expected results, we may just see another run of risk aversion take place! Make sure you strap on your forex seat belt and be ready for a wild ride tonight!

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Thanks to risk aversion and strong US economic data, the greenback was able to strengthen against most major currencies last week. Are we in for another week of dollar domination?

Before we take a look at what’s in store for the week, let’s backtrack to last Friday’s economic reports. Retail sales came in better than expected, posting a 0.4% rise for the month of April. This marks its seventh month in consecutive increases, reflecting how Americans are consistent shopaholics. Kidding! This continuous rise in spending implies that consumers have been a major force driving the economic growth in the US. Although core retail sales came in slightly below the estimated 0.5% increase, the greenback got another boost from the upward revisions in the March retail sales figures.

Industrial production also came in stronger than consensus as it rose by 0.8% in April, outpacing the forecast of a 0.6% increase. This was also much stronger than the 0.2% rise seen last March. Meanwhile, consumer sentiment improved from 72.2 to 73.3 in May, according to the survey conducted by the University of Michigan. This hints that the US consumer sector could continue to provide support for their economy.

This week could be another busy one for the greenback as the US is set to release a bunch of inflation and housing reports. Come Tuesday, the producer price index, building permits, and housing starts data are due. Producer prices are slated to post toned down upticks for April while housing starts are expected to show slight improvements. By Wednesday, the US will release its CPI and core CPI readings for April. The minutes of the latest FOMC meeting are also due then.

For today, only a couple of economic reports are on deck and that’s the Empire State manufacturing index and the TIC long-term purchases data. New York’s manufacturing is expected to dip from 31.86 to 30.00 in May, indicating that business conditions improved at a slower pace in the concrete jungle where dreams are made of. Keep an eye out for the actual results at 12:30 pm GMT. Later on, the TIC long-term purchases report could show that net purchases of US securities rose from 47.1 billion USD to 50.5 billion USD in March. Given the recent surge in dollar-buying, we might see a better than expected figure for March and the next months.