Daily Economic Commentary: United States

Trading Discussion News and Economy
264

“Argh! Not again!” yelled the Greenback as it chalked up another day of losses against its counterparts. In particular, the European currencies seemed bent on taking revenge against the Greenback as they continued to win back their recent losses.

Most economic reports from the US came in strong, with the import prices data and TIC long-term purchases report beating expectations. Import prices slid by only 0.6% in May instead of dropping by 1.1% as expected. It turns out that the decline in petroleum prices accounted for much of the slide in import prices for the month.

Meanwhile, the TIC long-term purchases report showed that net purchases of US securities fell from 140.5 billion USD to 83.0 billion USD in April. This suggests that demand for US securities rose more than estimated as investors from the UK, China, and Japan added to their Treasury holdings. On top of that, the ongoing debt drama in Europe encouraged investors to buy up relatively safer securities from Uncle Sam.

The Empire State manufacturing index turned out to be quite a disappointment as it failed to meet expectations. The index for June climbed from 19.1 to 19.6, falling short of the consensus at 20.1. Still, the rise suggests that manufacturing conditions improved during the month led by an increase in business investment and higher demand for exports.

Uncle Sam has a full day ahead, with a bunch of economic releases on the docket. First, the PPI and core PPI figures are due 12:30 pm GMT. These reports are slated to post a 0.5% drop and a 0.1% uptick respectively, suggesting that inflationary pressures are still subdued. Next, the housing starts report also due 12:30 pm GMT could print a 0.65 million reading for May, down from the 0.67 million in housing starts seen last April. After that, the capacity utilization and industrial production figures are due. Capacity utilization is expected to climb from 73.7% to 74.6% in May while industrial production is estimated to rise by 0.9%. Better than expected results could encourage risk appetite to stay for another day, possibly driving the safe-haven Greenback lower against its rivals.

Later on, Fed Chairman Ben Bernanke is scheduled to give a speech at 9:45 pm GMT. He’ll be talking about financial reform at a conference in New York so keep your ears open for his remarks on the ongoing debt drama. Reassuring comments from the Fed head could spur demand for the Greenback.

265

Relatively quiet trading yesterday, as dollar pairs remained unchanged against most other major currencies. The USDJPY stayed within range, closing at 91.41, just 2 pips higher than its opening price. The only major to post a significant loss was the GBPUSD, which dropped about 50 pips to close at 1.4706.

With the mixed results from the economic data released yesterday, traders weren’t quite sure what direction to take. This is probably what caused the tight moves in yesterdays trading sessions.

First, lemme start off with the bad news from the housing market. Both the building permits and housing starts reports failed to hit consensus. The annualized pace of building permits fell to 574,000, down from 610,000 last April. It was expected that the pace would rise to 630,000. Meanwhile, housing starts dropped by 10% during the same month, falling from a 659,000 annualized rate to just 593,000.

Some are suggesting that the end of certain tax credit programs probably led to the drop in new building construction. This indicates that future home spending and development will have to come from more natural means, like actual demand from consumers. In any case, this just gives more reason for the Fed to keep interest rates at low levels, as low rates would help lead to cheaper credit for consumers.

In other news, the producer price index reports came in slightly better than expected, printing figures of -0.3% and 0.2% for the headline and core reports respectively. It was projected that producer prices would fall by 0.5%, while the core PPI – which doesn’t include food and energy – would rise by just 0.1%. This is slightly good news, as it indicates that core prices are rising slightly…

Aww who am I kidding?! Just because its not so bad news doesn’t mean its good news! Once again, this is another sign that the Fed will probably not be hiking rates any time soon. As long as there are signs that inflation remains subdued, the Fed has no reason to implement any tightening measures.

Speaking of the Fed… Chairman Ben Bernanke did deliver a speech last night at a conference in New York. He didn’t drop any biggies about monetary policy, as he focused on financial reform and the role of the Fed in monitoring financial companies in the future.

Looking at today’s [=&currency[]=USD&importance[]=&importance[]=3&importance[]=2&importance[]=1&display=daily"]economic calendar](Forex Economic Calendar[), we’ve got another slew of data coming in. At 12:30 pm GMT, more inflation data will be available, as the CPI and core CPI reports are due. The reports are expected to post a drop of 0.2% and rise of 0.1% respectively last may. Seeing as how the PPI reports showed better than expected results, could we be in line for an upside surprise today?

Watch out also for the weekly unemployment claims and current account data, set to be available at the same time. Jobless claims are expected to be at 450,000 for the reported week, down from 456,000 the previous week. Meanwhile, the current account is projected to post a deficit of $121.9 billion for the first quarter of 2010, up from $116 billion the previous quarter. Now, I don’t believe that these reports will cause too much of a ruckus in the markets, but in any case, it’s better to be aware because any drastic difference from expectations may just cause some wild moves.

Lastly, the Philly Fed manufacturing index is due at 2:00 pm GMT. The index, which measures the economic health of the manufacturing industry in Philadelphia, is slated to post a reading of 20.0, slightly lower than May’s reading off 21.4. If this comes in much better than forecast, it could spark a run of risk appetite in equity markets, which could translate to gains in higher yielding currencies.

Phew! That was a long post! It seems like the US decided to just release everything today and take a day off tomorrow! Oh wait, there is nothing coming out tomorrow! Hmmmm… With that being the case, we could see bigger moves today, as traders push for their positions before the week comes to a quiet close. As I always say, be careful and keep those risk management rules in check! Good luck everybody!

266

The dollar was pounded across the board yesterday when a strong wave of risk appetite came crashing down on the markets. After staging a relief rally to 86.64 on Wednesday, the US dollar index was pushed down almost 50 points back down to 86.16.

Economic data released in the past last 24 hours was a mixed bag. Here’s the breakdown:

The weekly initial jobless claims, which was initially expected to report 452,000, came in with 472,000 instead. It marked the third increase in row, indicating that we could see unemployment insurance claims continue to rise in the following weeks.

Meanwhile, the current account balance beat consensus when it showed a -109 billion USD for the first quarter of this year, and not a -120 billion USD deficit as predicted. Additionally, the figure for the final quarter of 2009 was revised up to -101 billion USD from -116 billion USD.

The consumer price index was right in line with forecast. The core version that excludes food and energy items showed a 0.2% rise while the main index reported only a 0.1% increase. The low rate of inflation means that the Fed will probably maintain its stance on keeping rates accommodative for an “extended period.”

Finally, the Philadelphia manufacturing index was grossly off-target, printing a reading of 8.0, almost a third of the initial forecast of 20.0. This means that even though conditions in Philadelphia’s manufacturing sector is improving, the pace of improvement wasn’t up to par with expectations.

After yesterday’s wild action, US’s [=&currency[]=USD&importance[]=&importance[]=3&importance[]=2&importance[]=1&display=daily"]economic calendar](Forex Economic Calendar[) for today has nothing to offer anymore. With that said, I suspect we will either see profit taking on the dollar’s sell-off this week or some ranging behavior.

267

With barely any economic data released last Friday, the Greenback seemed to sail on calmer seas. Which reports could rock the Greenback’s boat this week?

The main event for the week is the FOMC statement on Wednesday. Even though the Fed is expected to keep rates at their current levels, their comments on the state of the US economy could stir up a storm on the charts. With inflationary pressures still subdued, Fed head Ben Bernanke could once again say that rates will remain low for an “extended period”, reducing demand for the Greenback. He could also highlight the current downturn in the housing market, using it as further grounds for maintaining a cautious stance.

But first, let’s see how the housing market fares upon the release of the existing home sales report at 2:00 pm GMT on Tuesday. Home sales are projected to climb up from 5.77 million in April to 6.23 million in May. However, a downside surprise might be in the cards now that the government’s tax credit program already expired. As Forex Gump pointed out in his recent post, the expiration of this program already caused a huge dent in building permits and housing starts. New home sales, which are due Wednesday, could also post a decline.

Aside from the usual weekly jobless claims report due Thursday, data on durable goods orders will also be released. It’s pretty odd how durable goods are expected to slide by 1.0% while core durable goods are slated to post a 1.1% increase in May. This suggests that purchases of transportation goods, which aren’t included in the core version of the report, dropped significantly last month.

On Friday, the US will release its final GDP reading for the first quarter of 2010. No revisions are expected for the previously reported 3.0% economic expansion. Also due Friday is the revised consumer sentiment report from the University of Michigan.

268

Mixed trading for the dollar yesterday, as it gained versus its European counterparts but fell against the Aussie and Kiwi. After gapping up to start the week, the EURUSD closed over 100 pips lower, to close at 1.2318. Does this mean that the recent trendline is broken?

Risk sentiment went on a topsy-turvy run yesterday, as all the euphoria about China’s decision to unpeg the Yuan died down a bit. I think that traders were a little too keen to jump all over the news. After all, the effects of such shifts in economic policies don’t just happen overnight! It will be awhile before we see the concrete effects of allowing the Yuan to appreciate.

For today, we’ve got more housing data due at 2:00 pm GMT. The annualized pace of existing home sales is expected to rise to 6.12 million, up from last month’s figure of 5.79 million. Seeing as how the housing market has been posting some poor results lately, could we be in line for a downside surprise? If today’s report fails to meet consensus, it may just spark another run of risk aversion.

Keep an ear out also for US Treasury Tim Geithner’s speech at 2:00 pm GMT. He will reportedly be talking about the TARP program before the Congressional Oversight Panel. It’ll be interesting to see what he has to say about the program. While his words aren’t as influential as Fed Chairman Ben Bernanke’s, it would still be a good idea to be careful around this time, especially with the existing home sales data coming out and with the European markets coming to close.

269

The dollar was all over the place yesterday, trading mixed across the board. While the dollar climbed against the comdolls and the euro, it lost out versus the yen and the pound.

The effects of the expiry of the Government’s 8,000 USD tax-credit program for first-time appeared again yesterday when the existing home sales report came in utterly below expectations. Instead of rising to an annualized number of 6.12 million from 5.79 million, existing home sales fell to 5.66 million, triggering a slight case of risk aversion.

For today, there will be two red flags on the US economic calendar.

The first one is the new home sales report which will be released at 2:00 pm GMT. The market expects that an annualized number of 424,000 homes were sold in May, which is slightly than the 504,000 in April. If the report comes in below forecast, we could see the dollar rally again on account of risk aversion.

As for the second one, it comes in the form of a statement. At 6:15 pm GMT, the FOMC will announce its decision on the Federal Funds Rate. It is widely expected for the FOMC decided to hold rates at 0.25% and keep its commitment to keep rates low for an “extended period.” If you want to trade the rate decision make (or lose) some big money, head on over to Forex Gump’s blog. In there, he provides an in-depth analysis on the event and the possible effect on price action.

270

My my, it looks like traders are exchanging their Greenbacks for currencies from better-performing economies. After advancing for the first couple of days of the week, the Greenback lost ground when bleak economic figures and a dovish Fed statement were released yesterday.

Just like the other housing figures released earlier this week, the new home sales report posted weaker than expected results. New home sales plunged from 446,000 to 300,000 in May, landing at its lowest level since 1963. Yeowch! It turns out that the expiration of the government’s tax credit program really had a nasty effect on the US housing market.

This downturn in the housing industry was one of the economic weaknesses highlighted in the FOMC statement. Words from Fed officials hardly provided any support for the Greenback when they retained their usual “extended period” phrase when talking about how long they’d keep rates low. On top of that, some of their remarks hinted that the US isn’t immune to a possible debt contagion. Even though they pointed out that they’re seeing some improvements in other areas of the economy, lone wolf Thomas Hoenig was still the sole dissenter when it came to keeping interest rates at their current levels.

Today, we’ll have a look at the May durable goods orders at 12:30 pm GMT. Durable goods orders are expected to dip by 1.2% in May after rising by 2.8% in April. Meanwhile, the core version of the report could print a 1.1% rebound in May, following a 1.1% decline in April. Stronger than expected figures could provide the Greenback a boost.

Also keep an eye out for the release of the weekly jobless claims. The report could show that 461,000 people filed for employment claims for the first time last week. This would be slightly less than the 472,000 in first-time jobless claims seen the prior week, suggesting some improvement in the labor market. Stay tuned for the actual figure due 12:30 pm GMT.

271

Mixed trading for the dollar yesterday, which gained against commodity based currencies but lost out against the euro and pound. With it being a Friday, what could be in store for us today?

The US got some varied results from durable goods orders yesterday. The headline report showed that durable goods fell by 1.1% during the month of May, after they had risen by 3.0% in April. However, I took out my Forex magnifying glass to look at the fine print, and it looks like this drop was largely due to a drop in transportation purchases.

Core durable goods, which doesn’t include transportation equipment, actually rose by 0.9%, which was just slightly worse than consensus of a 1.0% rise. Since this is a better gauge of consumer spending, this was taken as relatively good news for the US. It’ll be interesting to see though, what happens with durable goods in coming months. With all the weakness in the US housing market, will consumers be less willing to spend on big ticket items like fridges and furniture? After all, why would you buy a Lazy Boy if you don’t got a roof on top of your head!

In other news, weekly jobless claims came in at 457,000. While this was close to expectations, it was a nice improvement over last week’s figure of 476,000. Still, I remain sceptical about the state of the US labor market – initial jobless claims have been hovering over 400,000 for the longest time!

For today, I don’t think we’ll see too many big moves, as no red flags will be coming up. Just keep an eye out for the revised GDP and University of Michigan consumer sentiment reports coming out at 12:30 pm GMT and 1:55 pm GMT respectively. No changes are expected from the initial reports which showed GDP growth at 3.0% for first quarter of 2010, and the confidence index remaining steady at 75.5.

272

The dollar’s price action was as crazy as a monkey wearing tights and licking a tree last Friday! After trading in a very tight range throughout Asia and Europe, the dollar shattered into pieces once the US afternoon trading session rolled along. The US dollar index fell to 85.76, down 50 points from its opening level that day.

The dollar’s demise was caused by a combination of factors. For one, the US final GDP report showed that the country’s economy only grew 2.7% for the first quarter of this year and not 3.0% like the preliminary reports suggested. Secondly, European Commissioner President Jose Barroso said that the leaders in his region are firm in making sure that the euro stays as a “strong currency.” Finally, US stock equity indices clocked in minor gains, which helped risk appetite improve.

For today, watch out for the core personal consumption expenditure (PCE) index and the personal spending report at 12:30 pm GMT. The core PCE index, which is the Fed’s preferred gauge of the country’s inflation, is predicted to show an increase of 0.1%. Personal spending is expected to have risen by 0.1% too.

Further along the week, we’ve got a number of economic reports to keep track of.

The first one is the ADP’s version of the non-farm employment change on Wednesday. Used as a way to predict the US non-farm payrolls (NFP) coming out on Friday, the ADP’s version is slated to show that a net number of 58,000 jobs were created this month.

Then, on Thursday, the ISM manufacturing survey will be published. It is predicted to print a reading of 59, which means that, while the manufacturing industry expanded, the pace of growth slowed.

Finally, on Friday, the US NFP report will be released. The consensus is that the number of jobs lost for June was greater than those created by 103,000, opposite the 431,000 jobs gained in May. According to economists, the expected sharp turnaround in the NFP would portray the winding down of government workers as the decennial census begins to finish up.

So there we have it… A heavy week ahead, with a couple of important economic data here and there… Nothing too tough for ya’ll to handle for sure. Let’s all stay safe and do well this week folks!

273

Ho hum… Price action was a bit dry yesterday as the Greenback refrained from making any big moves against its counterparts. Traders hardly had any reaction to the G20 summit and the economic data released from the US.

Although several key economic issues were discussed during the G20 summit, it didn’t have much of an effect on the currency market. As Forex Gump mentioned in his latest entry, traders could still be waiting for more concrete measures from the G20 leaders. Still, their plans to cut down deficits and coordinate economic policies sound hopeful and could soothe investors’ fears… for now.

Meanwhile, US inflation seems to be improving, based on the core PCE price index released yesterday. As the Fed’s preferred measure of inflation, the better than expected 0.2% uptick highlighted the prospect of a rate hike. Then again, judging from the tone of the recent FOMC statement, a 0.25% increase in interest rates might still take a while.

Also released yesterday were the personal spending and personal income data. Even though personal income fell short of expectations, personal spending came in stronger than expected and posted a 0.2% increase for May. This could imply that consumers are a tad more optimistic with their financial standing and economic outlook.

The CB consumer confidence index due today could shed more light on how consumers feel. The index is slated to dip from 63.3 to 62.8 in June, indicating that their confidence took a slight hit during the month. Stay tuned at 2:00 pm GMT to find out if the actual figure beats the consensus and posts and upside surprise. If it does, it could provide support for the Greenback.

But before that, at 1:00 pm GMT, the S&P house price index will be released. The report could show that house prices climbed by 3.5% in April, following the 2.3% increase seen last March. Stronger than expected results could boost the Greenback since these would indicate that the housing market stayed resilient despite the expiration of the government’s tax credit program.

274

As the mighty cartoon T-rex said about 13 years ago… “We’re back!!!” Risk aversion returned to the markets yesterday, which of course meant another rampaging session for the dollar. The dollar posted some nice gains against the euro, with EURUSD falling about 100 pips from its opening price.

Risk aversion was back in vogue yesterday, as equity markets and higher yielding currencies all took a hit. It appears that with all the uncertainty about the state of global economic recovery, traders have decided to chill out a bit on risky assets.

This was clearly seen in the results of the CB consumer confidence index. The index printed reading of 52.9, failing to hit to consensus of 62.8. This was also much worse than last month’s score of 62.7, marking the first time in four months that the index did not rise.

Hmmm… are Europe’s debt contagion fears taking its toll on the markets? Well, according to Mr. President, Barack Obama and Fed Chairman Ben Bernanke, yes it is! I don’t know about you, but if two very important political figures are getting worried, that tells me that I should be too!

We did get some good news though, as the S&P housing price index indicated that housing prices rose by 3.8% in April, slightly higher than expectations of a 3.5% increase. This indicates that housing market is doing fine, even with tax credit programs coming to an end. Still, thanks to all the renewed concerns about economic recovery, government officials aren’t that optimistic… so they’ve decided to extend tax credit programs! Woohoo!

Looking ahead, I see more catalysts that could provide more fuel for risk aversion to keep chugging along.

At 12:15 pm GMT, the ADP employment report will be released. Word is that about 60,000 new jobs were added by private firms in the last month, up from the 55,000 increase seen in May. Traders will be keeping an eye out for this report as it could clues as to what the NFP report will release later this week.

Later on at 1:45 pm GMT, the results of the Chicago PMI report will be available. The index is expected to dip slightly and print a score of 59.1, down from the previous month’s reading of 59.7. Seeing as how consumer confidence took a hit last month, it’ll be interesting to see whether Chicago businessmen feel the same way. After all, if all us average Joes aren’t confident, we probably aren’t spending, which doesn’t bode well for business does it?

If these reports come in worse than expected, we could see another round of dollar buying take place. In any case, be careful out there! The markets are choppy right now, so make sure you stick true to your trade plan. If in doubt, stay out!

275

Betting on the dollar must have been tough yesterday given its mixed! The managed to clock in awesome wins against the comdolls and the pound yesterday, but it also took on a few losses to the yen, Swissy and euro.

What caused the dollar to trade mixed? Well, while risk aversion remained the dominant theme, positive news coming out from euro zone helped boost the euro. Apparently, banks in the euro zone area only needed 132 billion EUR in additional funding, less than half of the 300 billion EUR initially expected. This indicated that liquidity issues in the euro zone area have eased and that they need minimal support in terms of funding from the European Central Bank.

Another reason was the different signals brought about by economic reports. The ADP’s version of the non-farm employment change fell below consensus and showed a rise of 13,000 people in the number of people employed. In contrast, the Chicago purchasing managers’ index came in better-than-expected, printing a reading of 59.1.

For the day ahead of us, there will be a lot of red flags to watch out for.

The first one comes in at 12:30 pm GMT, when the US releases its report on initial jobless claims. The report is predicted to show that 455,000 people claimed for unemployment insurance, a tad bit lower than the 457,000 figure seen before.

Then, at 2:00 pm GMT, both the ISM manufacturing PMI and the pending home sales report will be released. The ISM manufacturing PMI, a reading of 59 is expected, down the 59.7 for the month of June reading seen in May. Meanwhile, the forecast on pending home sales is a drop of 7.4% for May, which is opposite the 6.0% in April.

276

Ack! The Greenback was off to a bad start this July as it fell against the rest of the major currencies. Judging from the weak US economic figures released, it seems that traders are starting to doubt whether the US could sustain its recovery.

US economic reports were all in the red yesterday as the results failed to meet expectations. First, the weekly jobless claims report showed that 472,000 people filed for unemployment benefits last week, higher than the 454,000 estimate and the previous 459,000 reading. Oh dear, this rising trend in jobless claims combined with the weaker than expected ADP employment change report sets a bleak tone for the upcoming NFP report. If the much-awaited employment report also disappoints, we could be in for more Greenback-selling. Like Forex Gump mentioned, it’s bad enough that analysts are projecting a negative figure. Don’t forget to stay tuned for that at 12:30 pm GMT today!

Just like the recent jobs reports, the results of the ISM survey also printed downbeat figures. The ISM manufacturing PMI, which was projected to dip from 59.7 to 58.9, fell much lower and landed at 56.2. The index for manufacturing prices saw a steep drop from 77.5 to 57.0 in June. Ouch!

Meanwhile, pending home sales plunged by a whopping 30% in May, most likely because of the expiration of the government’s tax credit program. The decline was more than thrice the forecast of a 7.4% drop. It doesn’t help that problems in the labor market could further dampen demand for houses. No wonder many started to question if the economic rebound in the US would last!

Aside from tuning in to the release of the NFP report, also keep an eye out for the factory orders data due 2:00 pm GMT. After rising by 1.2% in April, factory orders are expected to slide by 0.5% in May. Watch out in case the Greenback gets clobbered again!

277

It may be a day of parades, barbeques, and fireworks for the Americans today, but traders see no cause for celebration after the data released last Friday suggested a slower than expected economic recovery. EURUSD ended the week at 1.2543 and added 104 pips to the 182-pip rise last Thursday, while USDJPY closed at 87.66 after an intraday low of 76.33.

The nonfarm payrolls report met the grim expectations last week when it printed a negative figure. The data printed a 125,000 decrease after 225,000 of the temporary government Census workers ended their contract but only 83,000 were added to private payrolls.

The workers’ earnings and working hours also added to the employment problems when the average hourly earnings dropped by 0.1% to $22.53, while the weekly hours fell to 34.1 hours from May’s 34.2. The data supported the other reports that suggested weak employment demand.

The unemployment rate also dropped from 9.7% to 9.5%, but only because the labor force shrank by 189,000 following a 504,000 fall last May.

Lastly, monthly factory orders declined for the first time in nine months. The 1.4% drop was worse than the estimated 0.5% decrease and last month’s 1.0% growth.

The weak manufacturing and housing demand, as well as the gloomy employment prospects discouraged the dollar bulls not only because it lessened the possibility of an interest rate hike, but also because the weak fundamentals might affect the pace of the economic recovery and make the US more vulnerable to the Euro zone’s debt crisis and the softening export demand from China.

The Americans are enjoying their steaks and celebrating their Independence Day holiday today, but tune in for the ISM non-manufacturing report tomorrow at 2:00 pm GMT. Maybe we won’t see much volatility since the NFP was already released, but a number worse than the expected 55.2 index figure would support the depressing data released last Friday.

The weekly jobless claims report will also be released this Thursday at 12:30 pm GMT. Will we see improvements in employment, or will the economy continue to post disappointing results? Find out on Thursday!

278

The Greenback was as laid back as the US bankers who were busy livin’ the life and partying their hearts out yesterday. Though not much movement was seen on the charts, the Greenback made modest gains as the US holiday kept liquidity low in the markets. EURUSD was held to a 50-pip range, closing just 16 pips below its opening price at 1.2541.

The newswires were just as silent with no reports released yesterday. But today might be a different story as the US market players come flowing back in. It could be a pivotal, especially since the charts look like they are setting up for breakouts! Stay sharp, folks!

Today, the action continues with the June ISM non-manufacturing PMI set to come out at 2:00 pm GMT. Analysts believe we could see a 0.4 decline from the 55.4 reading that was printed for the month of May. If the US continues to publish disappointing results and the data comes in worse than expected, the markets might see another bout of risk aversion that can potentially boost the Greenback.

279

The dollar’s scorecard was as mixed as a pack of M&M’s yesterday. It lost against the euro and yen but gained against the Aussie, Pound and Loonie.

Yesterday, the ISM non-manufacturing report took center stage being the sole economic report from the US. According to our sexy new calendar, the index printed lower than the 55.4 consensus at 53.8. Sadly, ISM doesn’t mean “I See Money,” but actually stands for the Institute for Supply Management and, according to this report, the service sector grew at a slower pace in June. The employment subcomponent may have added more worry to the labor market’s health when it showed a drop to 49.7 from May’s 50.4.

Richmond Fed President Jeffrey Lacker’s loose lips may have also cost the dollar some pips. ‘Cos you know, loose lips sink pips? Haha. I crack myself up! Anyway, his comments which indicated that the central bank won’t be hiking interest rates soon may help explain why the dollar didn’t bring home the pip bacon.

If you go to our new calendar, you’ll see that we’ve got two members of the Fed speaking today. Let’s see if they could sink more pips at the expense of the dollar. Fed Consumer Protection Director Thompson will be speaking at 12:00pm GMT, later followed by Minneapolis Fed President Kocherlakota at 7:35pm GMT. Tomorrow, we’ll have the data on initial jobless claims and consumer credit on tap.

280

Yeehaw!!! It was a rough ride for the dollar bulls yesterday when they rode the erratic movements against the euro. EURUSD leveled off to close at1.2368 after an intraday low of 1.2553, but USDJPY ascended to 87.70 from its 87.52 open price.

Weaker than expected economic reports from the euro zone may have supported the dollar during the Asian session, but the positive retail sales comments from the US boosted risk appetite and erased the earlier gains of the dollar.

Kansas City Fed President Thomas Hoenig also made headlines when he sang a duet with Justin Bieber. It’s too bad I’m kidding, because that would have made my day… Not!

Anyway, Hoenig did go to the public, but only to express his support for a higher interest rate… again. In his Bloomberg radio interview, he said that he prefers the cash rate at 1% to prevent asset price bubbles that could trigger inflation when the economy recovers. His statement was taken as hawkish and further increased risk appetite.

Will the reports inspire a dollar rally today? The weekly unemployment claims is out at 12:30 pm GMT, and a number higher than the expected 461,000 claimants or last week’s 472,000 will support the grim employment data last week and might put a damper on the dollar bulls.

The monthly consumer credit will also be released today at 7:00 pm GMT. The number is expected to decrease by 1.9 billion USD, but a stronger figure might signal that consumers are more confident on spending.

281

That makes it seven in a row! Once again, the mighty currency tasted defeat against the euro as EURUSD shot up to a new two-month high of 1.2702, recording a 61-pip rise from its opening price.

USD bulls received heart-breaking news when the International Monetary Fund said the USD was overvalued. What made matters worse is that the IMF went on to announce that it upgraded its global growth forecasts. Their upbeat outlook sent risk appetite surging through the bellies of investors, sending them away from the safe-haven USD and towards higher-yielding assets. That’s enough to burst any bulls’ bubble!

The positive employment claims data that was published wasn’t enough to stop the USD bears from taking over. Analysts were expecting to see a modest improvement, from 475,000 unemployment claims in May to 461,000 in June. However, results came in surprisingly well, as June managed to record just 454,000 initial claims for unemployment benefits.

It seems like the US press will be starting their weekend early, with no high-impact reports due today. In the meantime, you may want to check on the euro zone for you daily economic report fix. Germany is scheduled to release its CPI figures, while France will be publishing its industrial production data. Maybe these reports can send shockwaves through the charts and help you bag some pips.

283

The dollar shook its currency-booty with the bulls last Friday as it gained against most of its counterparts. It was able to boomboompow 92 pips from the Pound, 63 from the Swissy, 51 from the euro, and 25 from the yen.

After a few days of significant losses, the dollar was finally able to escape the bear lair and ease its way into the bull turf. The currency started to come under selling pressure when the noise from the disappointing ISM non-manufacturing index hit markets. It was a good thing that Friday’s wholesale inventories report from the Census Bureau, didn’t catch the bears’ attention when it printed 0.1% higher than the consensus at 0.5% in May. A high reading usually has a bearish effect on the currency because it means that companies are likely to spend more when their inventories are running low.

With still nothing on our economic calendar from the US today, will the dollar continue to taste ‘em pips like sugar? Hmm, I guess we’ll just have to wait and see.

However, the rest of the week won’t be as chill as today and Friday. Tomorrow we’ll get a hold of the country’s trade balance figures for May which is expected to print a deficit of 39 billion USD. On Wednesday we have retail sales and the minutes of the Federal Reserve meeting on tap. Thursday will be especially busy with reports on consumer and producer prices. Also on Thursday will be the Philadelphia Fed and the Empire State manufacturing survey. Lastly, we’ll end the week with the CPI figures and the University of Michigan consumer sentiment index.

284

The dollar kicked off the week on a slightly positive note as the strong stock reports boosted the demand for the dollar. EURUSD closed at 1.2596 after its intraday low of 1.2551, but risk aversion in the euro zone enabled the yen to gain on the dollar at 88.62 after an intraday high of 89.16.

Alcoa Inc, the largest US aluminum producer, posted better than expected profits for the second quarter. This boosted investor confidence for the US earnings season since Alcoa is usually the yardstick for industrial and commodity demand. The dollar index rose by 0.3% as the traders feasted on the dollar.

Will the US continue to post better than expected results today? At 12:30 pm GMT, the trade balance report will be out The trade deficit is expected to narrow down by 1 billion USD from April’s 40.3 billion USD, but hopes aren’t too high as the strong dollar might have affected the exporters’ profits.

The IBD/TIPP consumer confidence report will also be released today at 2:00 pm GMT. My nerdy forex friends told me that the economic optimism for July is expected to drop to 45.5 from June’s 46.2 index figure. Take note that 50.0 represents the base line score. A reading significantly lower than this mark would indicate falling consumer optimism. .

The last report from the US today is the Federal Budget balance out at 6:00 pm GMT. The budget deficit for June is expected to shrink to 72.5 billion USD from May’s 135.9 billion USD figure, but a lower figure might suggest that the government’s anti-deficit efforts were working.

Whew! With these big reports coming your way, you need to watch your trades closely, my friends!