Daily Economic Commentary: United States

Trading Discussion News and Economy
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Yesterday, the USD was rocked by the one-two combo of the successful Greek debt auction and poor US data. EURUSD leaped from its opening price of 1.2592 to finish at 1.2715, marking a 123-pip gain for the day.

Risk appetite was in full swing as Greece’s successful bond auction signaled investors’ rising confidence in the government. It got investors thinking, “Maybe things aren’t so bad after all.” As a result, they mustered up the courage to take on bigger risks, leaving the safe-haven arms of the USD for higher-yielding assets.

The USD couldn’t find support from its motherland either. Instead of showing a narrower deficit, from 40.3 billion USD to 39.0 billion USD, the May trade balance widened to 42.3 billion USD. This is the largest deficit in a year and a half!

Remember, the trade balance measures the difference between exports and imports, which are also components of the GDP. If the trade deficit continues to widen, it could take its toll on GDP growth, and we all know how that usually harms the USD.

Likewise, the IBD consumer optimism report failed to reach expectations of a reading of 45.5. It reflected a bleaker consumer economic outlook by posting a reading of 44.7 for July, down 1.5 from last month.

With the labor market and trade industry posting red figures recently, the USD is in dire need of support. Maybe USD bulls can find their catalyst for a bull run if the June retail sales report surpasses the forecast of a 0.2% decline, following the 1.2% decrease in retail sales in May. Catch the report later at 12:30 pm GMT.

Then after that, the markets get a chance to peek into the minds of the Fed when the FOMC meeting minutes are published at 6:00 pm GMT. The records from their most recent meeting could reveal vital information as to where the Fed plans to steer the economy, so keep your eyes peeled and your ears open!

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The dollar got dumped again yesterday as the bulls saw that it wasn’t the Greenback that was bringing sexy back with ‘em pips. After opening at 1.2716, EURUSD peaked at 1.2778 before ending the day at 1.2738. Currency traders also drove GBPUSD up the charts giving the Greenback its biggest loss of 96 pips.

Wanna know what happened? Here’s the scoop on the dollar’s sob story.

First, there was the disappointing US data that caused the bulls to turn the other cheek. The Bureau of Labor Statistics announced that the index for import prices fell short of the -0.4% consensus by printing at -1.3% in June. Also hurting the dollar was the retail sales report from the Census Bureau that posted a 0.5% decline in June when the market expected a softer fall at 0.2%. Tsk, tsk.

And that was only the beginning of the dollar’s bad day. The heart-breaker came a little later with the release of the FOMC minutes. Members of the Federal Open Market Committee expressed their concern about the country’s economic outlook by saying that it has shifted to the “downside.” Duh, duhn, duhn, duhn! I don’t know about you, but that sounds pretty darn dovish to me! There were even some who made things worse for the dollar by bringing up the issue of deflation. Ouch! That just crushed all hopes for an interest rate hike! On the not-so-bad side, the committee did not see any immediate need to further ease the current monetary policy.

Because it seems like the market is getting clingy with the fundamentals, will we hear the “it’s not you, it’s the US economy” line from the dollar bulls again today? Hmm, it’s too early to tell as we have quite a handful of reports on the economic calendar.

At 8:30 pm GMT we have the July’s Empire State Survey and June’s PPI both of which are anticipated to depress the dollar with forecasts lower than their previous readings at 18 and -0.1% respectively. The initial unemployment claims figure also is also seen to print lower at 445,000. But don’t worry, the lower the claims, the better it is for the currency.

Forty-five minutes later, at 9:15 pm GMT, we’ll have the second batch of reports. June’s industrial production is expected to woo more bears than bulls with a -0.1% forecast for June and capacity utilization just keeping it steady at 74.1%.

Lastly, we have the Philadelphia Fed Survey at 10:00 pm GMT. The index is projected to end the dollar’s day on a good note with the consensus 2 points higher than June’s figure at 10.

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Geronimoooo!!! The depressing economic data from the US and the optimism for the euro currencies plunged the dollar into the pip deeps yesterday. EURUSD rocketed by 206 pips from its open price and closed at 1.2949, while USDJPY suffered a 111-pip drop from its intraday high at 87.39.

After the release of poor US retail figures and the gloomy testimonies of the FOMC, the reports published yesterday did little to put up a good fight against the positive reports and outlook in the euro region.

For starters, the decrease in unemployment claims fell behind expectations, while the continuing claims swelled by a significant 247,000. This highlighted the FOMC’s concern that the employment continues to pose a threat to the US’seconomic recovery.

The sentiments on the manufacturing sector were also pessimistic, evidenced by the drop of the Philly index to 5.1 from June’s 8.0 figure, and the sharp fall of the Empire State manufacturing index from 19.6 in June to this month’s 5.1 index figure.

Lastly, the monthly PPI decreased by another 0.5% in June after declining by 0.3% last May. This was taken negatively, because it might mean that producers are dropping prices to attract buyers, or that there wasn’t enough demand to push up prices.

Today the CPI figures will be released at 12:30 pm GMT. Analysts aren’t expecting much after the disappointing streak of data this week, but watch for any volatility in case the figures badly miss projections of a 0.1% decline in the price of consumer goods

The TIC long-term purchases will also be available today at 1:00 pm GMT. The net figure is expected to narrow down sharply to 35.7 billion USD from April’s 83.0 billion USD, but a higher figure might suggest that the Americans are more confident on buying their currency.

Lastly, the University of Michigan will also post their consumer confidence report at 1:55 pm GMT. Will the consumers mirror the negative sentiment in the manufacturing industry? Don’t miss all the big news!

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Aaand we’re back! After taking on big losses through most of the week, the Greenback finally showed signs of life last Friday. Although it ended last week strongly against most currencies, it wasn’t able to have its way the euro. EURUSD closed 7 pips lower only at 1.2926, after hitting a daily high of 1.3008.

Why the comeback? It got a visit from an old friend named Risk Aversion! While equities and commodities were dropping like bombs, the Greenback and risk aversion were skyrocketing hand in hand.

But the Greenback could only fly so high, as poor fundamentals kept it from reaching the skies. Red numbers were strewn across the board as the US published high impact reports.

The CPI data confirmed threats of deflation by posting a 0.1% decline in prices in June, just as expected. Following a similar 0.2% decrease in May, this makes the chances of a Fed rate hike even more unlikely.

TIC long-term purchases in May logged in at 35.4 billion USD, short of the forecast of 40 billion USD, and far from the previous month’s record of 81.5 billion USD. Since this figure measures the difference in value between foreign long-term securities bought by US citizens and US long-term securities bought by foreigners, it might be a sign of declining US investment, which could take its toll on the Greenback.

It seems like consumers are taking note of all the negative reports that have been published lately, because they’re not looking too confident. The Preliminary University of Michigan consumer sentiment survey gave a reading of 66.5 for July, which isn’t only worse than the expected reading of 74, but is also a major downgrade from the 76 reading of June. Could this decline in confidence result in weak consumer spending? Only time will tell!

Strap on your seatbelts, kids! You’ve got another set of reports coming your way this week!

At 12:30 pm GMT Tuesday, the June building permits report is slated to show 580,000 new residential building permits issued, which is 10,000 lower than that of the previous month. Since this report is indicative of future construction activity, look for the Greenback bulls to start a run if results come in better than expected.

Then on Wednesday, Fed Chairman Bernanke is set to testify on economy and monetary policy. Listen to what he has to say at 2:00 pm GMT. The man might just trigger a Greenback rally if he lets a few hawkish comments slide, so be sharp!

We get our last set of reports on Thursday, starting with the unemployment claims data at 12:30 am GMT. Analysts expect to see the previous record of 429,000 first-time unemployment insurance filings increase to 460,000 as of last week. A high figure is usually bad for the Greenback because declining labor market conditions often result in weaker consumer spending.

Finally, at 2:00 pm GMT on Thursday, the US rolls out the June edition of its existing home sales report. Analysts believe that an annualized total of 5.2 million were sold in June. Since this figure is already lower than the 5.66 million in May, Greenback bears might just have their way if the data comes in worse than expected.

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After gapping lower to start the week, EURUSD managed to close 38 pips higher and close at 1.2944.It wasn’t all boo hoo for the Greenback though, as it gained against the yen, Pound and Swissy. If you ask me, its scorecard for Monday was as mixed as the movie reviews for Sorcerer’s Apprentice!

With very few economic reports yesterday, forex market seemed like a ghost town. The euro got a boost when Fitch upgraded Estonia’s credit rating. Too bad the dollar didn’t share the same fate. The only data that came for from the US had currency traders giving the dollar a Rotten Piptatoes review!

The National Association of Home Builders Survey showed that confidence slipped to its lowest level in 15 months with the index printing at 14. Yikes! Readings below 50 indicates pessimism and the index being at 14 means that Americans are probably as disappointed as movie goers were with The Last Airbender! To make matters worse, it fell short of the consensus which was supposed to remain unchanged from last month’s reading of 16. This could be the reason why the dollar was unable to knock off the euro from the bulls’ must-charge list.

But that was that. Let’s check out the next attractions.

Today’s economic reports star housing starts and building permits and will show at 12:30 pm GMT. Both of which are expected to print a figure of 580,000 for June. Analysts aren’t really keeping their hopes high with housing starts as the consensus is 10,000 houses lesser than May’s reading. However, the opposite is true for building permits as it is anticipated to increase by the same amount. If it’s too confusing, just remember that if the actual figures are higher than the forecast, the dollar will most probably get a thumbs up from currency traders.

Also, you may want to tune in to the earnings reports of some stars of America’s corporate sector today as some analysts attribute the stability of the markets to these.

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The dollar’s price action yesterday was as mixed as the colors of M&Ms after traders played tug-of-war with risk appetite. The dollar lost to the pound and the franc, but gained 58 pips on the yen. Meanwhile, EURUSD locked in at 1.2893 after tapping an eight-week high of 1.3029.

The mixed data form the US might have led the hodgepodge when building permits in June climbed to 590,000 after the 570,000 permits last May, but the housing starts dropped to 550,000 after May’s 580,000 figure.

Other concerns joined the shindig and influenced the dollar price action. Aside from technical resistance, some say that EURUSD’s failure to hold the 1.3000 psychological mark was due to profit-taking, selloff in equities, and worries on the EU stress tests.

USDJPY, on the other hand, might have been affected by the rumors of a possible currency intervention by the BOJ.

Today Fed Chairman Ben Bernanke will be the life of the party when he gives his speech before the Senate Banking Committee. Will he give clues on the Fed’s next moves?

Watch him live at 6:00 pm GMT as he answers questions on their monetary policy, economic growth, and their future policies–all while brushing off the voter-friendly but totally unrelated questions of the panel. After all, mid-term elections are a few weeks away. Don’t miss all the fun, kids!

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Winner, winner, chicken dinner! The USD showed the markets that it had an ace up its sleeve yesterday, as it chalked up wins across the board. Thanks to a healthy bout of risk aversion, EURUSD folded from its opening price of 1.2892 to close at 1.2768.

Leave it to the main man Bernanke to get things going for the USD. In his testimony yesterday, he admitted that the future of the US economy is still quite uncertain, and that the Fed may need to take more policy actions to set things right. Hmm… Those aren’t exactly the words you’d like to hear from the Fed chairman himself. This probably explains why investors were spooked and sought refuge in the safe-haven USD.

Up ahead at 12:30 pm GMT, we’ll see if the US can record better-than-expected results for the third week in a row. Forecasts have the number of first-time unemployment insurance filings at 449,000, up 20,000 from the previous week. Another upside surprise from this report could raise the stakes in favor of the USD.

Then at 1:30 pm GMT, Bernanke takes to the stand once again. Let’s see if he has anything new to say. If he speaks pessimistically, just like he did yesterday, investors will probably place their bets on the USD again.

Lastly, the markets might find another catalyst for a USD rally if the existing home sales data for June prints higher than the anticipated 5.10 million USD, which is 0.56 million USD lower than the May figure. Catch the report at 2:00 pm GMT!

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The dollar seemed a little pipsy as if the mix of good and bad news yesterday was a bit too much to chug. Midway through the London session, the bulls came in charging and pushed the pair to the intraday high of 1.2931. The day ended with the dollar sustaining a 117 pip loss against the euro.

So what did the dollar chug to make it so dizzy?

According to the Department of Labor, there were 464,000 people who filed for unemployment benefits last week, which was more than the market’s 449,000 expectation and the previous week’s 427,000 reading.

The bad news was then followed up by the second half of Fed Chairman Ben Bernanke’s testimony on the economy. There was really not that much difference on what he said on Wednesday, but he made it clear that the Fed definitely won’t be raising interest rates soon given the poor labor market conditions.

Then there was the rebound in stocks, optimism for earnings reports and positive data from Europe that sobered up the market’s sentiment. Risk appetite got even more stir from the second batch of US reports that made the dollar look like a warm-and-not-at-all-appealing beer to investors.

Existing homes sales data also revealed higher demand in the housing industry. The data showed that the annualized pace as of June was at 5.37 million, which was higher than the expected pace of of 5.1 million. More good news for the housing sector was the 0.5% increase in house prices in May that overshot the -0.3% forecast. Yeah, it doesn’t really mean that the economy is in tip top shape but it is an improvement, right? The bulls in yesterday’s trading thought so too.

We don’t have anything on tap for the dollar today but we do have the EU Stress Test results later. Keep tabs on that as it will most probably give the market a major hangover. Good luck on your trades!

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“IT IS ON!” Tough luck, guys, it’s not the battle cry of cheerleaders, but a shout of the euro last Friday after the better than expected economic reports from the region and the Fed’s gloomy expectations for the US economy flipped the risk appetite switch on.

This was reflected by the big rise of EURUSD to its 1.2915 close after plunging to an intraday low of 1.2793, and USDJPY’s 46-pip gain from its open price at 87.37.

There was no economic data from the US last Friday, so all eyes were on the big EU stress test released at 16:00 am GMT. But the euro sneaked in a lead even before the results were published when the German IFO report was printed better than expected. This enabled the pair to continue rising to as high as 1.2966 when the stress tests revealed that only 7 out of 91 banks failed the test. For many traders, a score of 92.31% ain’t half bad.

Of course, it didn’t help that the Fed’s dovish stance on the US economic recovery were fresh in our minds. In his speech last week Bernanke commented that US recovery was “unusually uncertain”, and that the Fed is leaning towards easing, and not tightening of monetary policy in the near future.

Good thing the dollar will have lots of fighting chances every day of this week, starting with the new home sales report at 2:00 pm GMT today. New home sales are expected to increase to 317,000 after May’s 300,000 sales, but a worse-than-expected figure might mean that Americans still need government stimulus to buy houses.

Other weapons in the US data arsenal this week include the July consumer confidence report out tomorrow at 2:00 pm GMT, the durable goods order for June on Wednesday at 12:30 pm GMT, the unemployment claims on Thursday at 12:30 pm GMT, and the big quarterly GDP report on Friday at 12:30 pm GMT. While expectations are generally bleak, better-than-expected figures might go a long way in easing concerns on the US economic recovery. Don’t miss all the action!

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Greenback bulls could’ve cheered their lungs out and tumbled in the air, but it still wouldn’t have made a difference! Yesterday just wasn’t a good day to be a Greenback fan. A positive US report boosted confidence and dragged the dollar down against most of the majors. Versus its European counterpart, it didn’t even put up a fight as EURUSD climbed 115 pips to perch at 1.2994.

Risk sentiment once again took over as relief over the European stress tests and better-than-expected US data gave investors enough courage to leave the safe-haven currency.

According to the latest new home sales report, new single-family homes were built at an annualized pace of 330,000 in June, up from 267,000 in the previous month. How refreshing! Why do I say this? Well, it’s been a while since the US has received good economic data so it’s no wonder investors went risk-hungry after actual results surpassed expectations of 311,000 new homes!

Watch out at 2:00 pm GMT, as the consumer confidence report will be released. Has confidence fallen yet again in the past month? Given all the poor data that came out last month, don’t be surprised if the index fails to print a reading better than 51.0.

The action continues tomorrow when the June core durable goods orders data is released at 12:30 pm GMT. Most are expecting to see a modest growth of 0.6% following the 1.6% upsurge in May. As a leading indicator of future production activity, this report has the ability to start another wave of risk-taking and Greenback sell-off if it prints better than expected.

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The dollar pulled off a Miley Cyrus in yesterday’s trade as it showed investors that it can’t be tamed from getting those pips! It gained against the yen, franc and the Loonie but was still unable to move its currency hips like “Yeah!” to knock the Pound and euro down the charts.

After opening at 1.2995, EURUSD closed just above the psychological handle at 1.3006 and cost the dollar a 14-pip loss.

  So what made the dollar hot like that in yesterday’s trade?

We heard mixed economic reports from the US with the S&P Case-Shiller Home Price index for May printing better than expected and consumer confidence falling to its five-month low in June. Hmm, I’mma have to say it was a mix of fundamentals and risk sentiment that gave the dollar its charm to investors. Let me give you a recap.

  Standard and Poor’s Home Price Index revealed a 4.6% uptick in May that overshot the 3.9% consensus. If it was fundamentals dictating price action, the report might have wooed in investors to the dollar as it could imply that the US housing market may not be as unhealthy as the market perceives it to be. 

  The disappointing consumer spending index for June which fell to 50.4 and missed the forecast which was at 51, may have helped the dollar by sparking risk aversion and highlighting its ‘safe haven’ reputation to investors as they scrammed from the higher-yielding currencies.  

  However, it may not have been so much about risk aversion because if we think about it, investors may have braced for the decline in consumer spending. Heck, it was only a few days ago when [Fed Reserve](http://www.babypips.com/forexpedia/Fed) Chairman [Ben Bernanke](http://www.babypips.com/forexpedia/Ben_Bernanke)expressed his pessimism on the US economy. Whether it was fundamentals or risk sentiment, it sure launched a hella-big party in the USA! 

  Let’s see if investors will still find the dollar enticing today with the durable goods report at 12:30am GMT and the Fed’s Beige Book at 6:00pm GMT. The Census Bureau is expected to announce that the total value of new purchase orders for manufacturers in June increased by 1% after posting a 0.6 decline in May. However, analysts don’t have the same level of optimism from the Fed as they are expecting the Beige Book to reflect Bernanke’s dovish comments.
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Don’t count me out just yet! Yesterday, the disappointing US data tamed risk appetite in markets and boosted the dollar ahead of most major currencies. EURUSD failed another attempt to close above 1.3000 at 1.2986, while USDCAD ended the day at 1.0384 after an intraday low of 1.0256.

The durable goods orders report yesterday showed a drop of 1% after the revised 0.8% decline last May. Orders for nondefense aircrafts, for example, dropped by 25.6%, while computers and electronics orders declined by 4.1%. Uh-oh, are those iPhone 4 signal problems more serious than we thought?

The Fed’s Beige Book was also released yesterday, but it turned out to be a snoozefest as it only echoed Fed Chairman Ben Bernanke’s statements last week. But, since the book is important to the Fed’s monetary policy decisions, I might as well give you the lowdown.

The report reflected tight lending problems and weak housing and construction industry, but it also posted modest growth in retail sales, manufacturing activity, and labor conditions.

Will the weekly unemployment claims due at 12:30 pm GMT today show the same optimism for US employment? The jobless claimants are expected to drop to 457,000 from last week’s 464,000, but a larger decline might spark another round of risk appetite in markets.

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Hee haw! The dollar starred in Friday’s “Wild-Wild-Pips”-themed trading as the financial market ended July with a showcase of volatility. EURUSD peaked at 1.3094 before it tumbled down to the day’s low at 1.2980. It then traded higher and closed the day above the 1.3000 handle but still gave the dollar a 46-pip win.

Despite its win, analysts were still unimpressed of the Greenback’s performance as it lost to the yen, Pound and Loonie. Maybe Friday’s mixed economic reports might explain why the dollar was unable to make it to the currency pipbuster list. Let’s look at them shall we?

The University of Michigan consumer sentiment index and Chicago PMI for July made the dollar look pipgenic to investors when they beat their respective forecasts at 56 and 67.

According to the University of Michigan, Americans were more optimistic in July with its consumer sentiment index printing at 67.8. It beat the market’s expectation which was up by only half a point from June’s reading at 67.

Also, the Printing at 62.3, the Chicago PMI somehow suggested that all hope is not lost for the country’s manufacturing sector. It printed at 62.3 and overshot the market’s forecast which was at 56.

Then there was the GDP report for the second quarter. Duhn, duhn, duhn, duhn. The figures revealed that the economy only grew at an annual rate of 2.4%, slower than the 2.5% forecasts and the previous quarter’s 3.7% reading. Yikes! I don’t know about you but I think this seems to support Fed Reserve Ben Bernanke’s “unusually-uncertain” prophecy for the country’s economic outlook. This definitely caused a backlash on the dollar’s attempt to be on the pipbuster list.

It looks like the dollar will continue its wild ride down the charts today. Both construction spending and the ISM Manufacturing PMI figures are expected to print lower than the previous reading at -0.5 and 54.5 respectively. But hey, it ain’t over til it’s over right? Maybe the figures will come up better than expected and boost the dollar. Watch out for these later at 2:00 pm GMT!

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Once again, we saw another round of risk appetite, which led to another down day for the dollar! It’s all science brotha! EURUSD closed another 100 pips higher at 1.3172, while GBPUSD continued its impressive run, as it finished 177 pips higher for the day at 1.5888.

Risk appetite got another boost yesterday, as positive earnings and economic data hit the airwaves. The ISM manufacturing PMI printed a reading of 55.5, which was slightly better than the forecasted figure of 54.2. Hmmm… yesterday, didn’t I say that it might just come in better than expected? Ha – just playing! That was a lucky guess!

In any case, this data indicates that manufacturing sector is growing, although at a slower pace now. I’d keep an eye out on the new-order component of the index, which has been posting dismal results the past two months. Could this be a sign of future weakness?

Still, traders remained optimistic, as a majority of the surveyed companies will reportedly increase hiring and capital expenditure in the coming months. Coupling this with unusual optimism following US Fed Chairman Ben Bernanke’s comments yesterday, it’s no wonder that traders became risk hungry!

Ah yes, before I forgot, my good buddy, Big Ben Bernanke, did drop some words of optimism yesterday. Bernanke said that wage increases in the coming year would help support recovery and that the Fed will most likely maintain the current monetary policy. In addition, he avoided dropping any dovish comments, which was probably why traders became so bullish yesterday.

Looking at today’s economic calendar, we’ve got the core PCE report and personal spending and income data at 12:30 pm GMT. Remember, the PCE is the Fed’s preferred index to look at when making any decisions regarding inflation. The index is expected to show that inflation remains subdued, with prices rising just 0.1% last June. If this figure comes in drastically lower than expected, it may just lead to another dollar sell off, as it would give the Fed reason to open it’s doors to more quantitative easing measures.

Watch out also at 2:00 pm GMT, as pending home sales data is on deck. Pending home sales are expected to have increased by 5% in June, but the figure I’m most interested in is if there will be any revision to May’s figures of a whopping 30% drop! Don’t tell me y’all forgot about that! If we do see an upward revision, it may just spark another round of optimism in the markets, which could spell doom for the struggling dollar.

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Call a doctor, quick! The Greenback’s looking really sick! It followed up its slow start to the week by losing ground against most of the other majors yesterday. Against the euro, it hit a three-month low as EURUSD closed at 1.3231, marking a 60-pip drop for the day.

It seems like the Greenback could be bedridden for a while judging by the unhealthy diagnosis of yesterday’s reports.

The core PCE price index was unable to meet expectations of a 0.1% rise in prices by revealing that prices were unchanged in the month of June. The previous month’s 0.1% uptick is already considerably low, so the US better be careful. If this trend of low inflation continues, they might find themselves in a deflationary downward spiral!

Adding to that, the June pending home sales report could not deliver on the 4.0% growth that was expected following the staggering 29.9% drop in May. Instead, the number of homes under contract declined even more, showing a 2.6% decrease from the previous month. Ouch! It looks like things are getting worse rather than better in the housing industry!

Maybe today’s reports will be the miracle drug that will revive the Greenback.

Expect a lot of movement in the markets when the ADP employment survey hits newsstands at 12:15 pm GMT. Analysts are projecting a stark improvement in the change in the number of employed people. They say the 13,000 increase in May likely grew to 38,000 in June. This report is often treated as a preview of Friday’s release of non-farm payroll data, which is one of the hardest-hitting reports out there. Don’t miss it!

Then at 2:00 pm GMT, the ISM non-manufacturing PMI is scheduled to come out. The index is slated to drop from 53.8 to 53 in June, but if results come in better than expected, it could mean that the services sector isn’t doing as badly as everyone thinks it is. There’s hope for the Greenback yet!

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Touch down USD! It was able to obtain its first victory of the week against the euro, thanks to an awesome assist from positive US economic data. EURUSD ran up the charts starting from the 1.3231 yard line and locked in a win for the USD when it reached the end zone at 1.3164.

It looks like the US finally caught a break from disappointing economic figures with the release of yesterday’s reports.

The USD’s offense began with the ADP employment survey which revealed that 42,000 jobs were added in June, instead of just 30,000 as forecasted. Succeeding the 19,000 increase in May, the surge in June marks the fourth consecutive increase in the number of employed people in the US. Could this be the start of the labor market’s rebound? You might have to wait for tomorrow’s much-awaited non-farm payroll report to get a clearer picture.

It then followed up its attack with the ISM services PMI, which upgraded its reading from 53.8 to 54.3 in June. Such a change indicates that expansion in the service sector picked up last month. The report also revealed that the service sector’s strong growth has helped it contribute more to the labor market’s recovery than the manufacturing sector. Way to step up!

Still, I sense there may be something fishy going on. Despite the dollar gaining versus the European currencies, com-dolls remained resilient. Ahh… .more divergence in the markets I see!

We’ll probably see a ton of action today, as we’ve got tons of reports coming out across the globe. On the US side of things, at 12:30 pm GMT, weekly unemployment claims data are due. Market participants are anticipating a decrease from 457,000 to 455,000. If the US can deliver what’s expected, or maybe even exceed expectations, the USD might just find itself with back-to-back victories!

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“I’m bringin’ sexy back,” sang the dollar as it recovered some of its losses in yesterday’s trading. Why? Coz ‘em other currencies just don’t know how to act with risk aversion! EURUSD fell to 1.3134 after reaching an intraday high of 1.3236. However, the dollar wasn’t able to hang on its gains as it still ended the day with a 22-pip loss at 1.3186.

Yesterday’s weekly jobless claims report turned the market’s sentiment from positive to negative. It revealed that 479,000 people filed for unemployment benefits, overshooting both the 455,000 and last week’s reading of 460,000.

Now the big question is, will the NFP report heighten risk aversion and send the dollar flying high with pips?

Hmm, I think it’s still a tough call. The figure for payrolls is expected to have improved to -65,000 in July from -125,000 in June and Americans are also seen to have received more income in the previous month by 0.1%, after it declined by 0.1% in June. However, the unemployment rate is projected to have increased to 9.6% from 9.5% in June.

You should check out Forex Gump’s latest blog before the announcement is made at 12:30 pm GMT to help you anticipate better the figures. Be careful and may the pips be with you!

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The Greenback just can’t catch a break, can it?! It was pinned by all the other major currencies last Friday as weaker than expected non-farm payroll data forced it into submission. Just like how Chael Sonnen tapped out to Anderson Silva, the Greenback had no choice but to give in to its nemesis, the euro, causing EURUSD to rise 103 pips for the day.

What was up with the July NFP data? It marked an improvement from the previous month’s record of a 221,000 decrease, but it just wasn’t good enough! Investors were expecting much more, especially since the ADP employment survey suggested the possibility of better-than-expected results. Instead, July posted a heartbreaking 131,000 drop in the number of employed people, almost double the expected decline. Ouch!

The unemployment rate offered a bit of a consolation, but investors didn’t seem to notice. Unemployment stayed at 9.5% in June, beating forecasts by 0.1%.

Hold onto you seats, you’ve got another action-packed week ahead of you!

To start things off the FOMC makes its interest rate statement tomorrow at 6:15 pm GMT. Though most expect rates to stay at 0.25%, you could be in for some wild moves since the FOMC tends to wrap their decisions in juicy comments about monetary policy. Watch out for any hawkish remarks that could send the Greenback on a climb!

Then at 12:30 pm GMT on Wednesday, the US publishes its trade balance, which is anticipated to shrink slightly from a deficit of 42.4 billion USD to 42.2 billion USD.

The action continues on Thursday with the release of last week’s unemployment claims data. Analysts are projecting unemployment claims to fall 14,000 to record a total of 465,000 unemployment claims. As usual, keep an eye out for better-than-expected results that can spark a Greenback rally.

Friday ends the week with the simultaneous release of the CPI figures, retail sales data and the preliminary University of Michigan consumer sentiment report at 12:30 pm.

Forecasts are for a 0.2% increase in prices, following the previous month’s 0.1% decline. Can July’s CPI figures calm fears of deflation? Wait and see!

Likewise, retail sales are expected to pick up as well, from recording a 0.5% drop in June to posting a 0.4% growth in July.

Last but not least is the University of Michigan consumer sentiment report. Hmm… Will sentiment improve from 67.8 to 69.8 as expected, or will it disappoint just like the recent string of bad economic data? Tune in to find out!

303

The Greenback must’ve had a good rest over the weekend! Slowly but surely, it regained much of last Friday’s losses during yesterday’s trading sessions. You could even say it owned the charts with the way it beat most of the other major currencies! The Greenback had an awesome start to the week against the euro as EURUSD fell 68 pips within the day to end at 1.3228.

The fact that yesterday lacked any hard-hitting reports didn’t stop Greenback bulls from staging a rally. Let’s see if they can follow up yesterday’s dominant performance with another win today.

Check out your economic calendar and you’ll see you’ve got a potential market mover in the FOMC statement. It wouldn’t come as a surprise if the Fed decides to leave rate unchanged at 0.25%. Still, the markets could be in for some shocking news if the Fed makes remarks about future monetary policy.

Some say the dollar could weaken if the Fed decides to reinvest mortgage-backed securities and conduct asset purchases. Is quantitative easing really in the US’s future? Tune in at 6:15 am GMT to find out!

304

Thanks to risk aversion, the dollar was able entice currency traders with its p-p-p-poker face and drive EURUSD to an intraday low of 1.3074. But it wasn’t long until fundamentals kicked into gear.

After the much-awaited FOMC statement, the pair took a U-turn and peaked at 1.3228, erasing the dollar’s earlier gains. The dollar got lucky that there wasn’t enough fuel left to power the bulls and EURUSD closed the day lower at 1.3184.

  I know you’re excited to get the lowdown on what the [Fed](http://www.babypips.com/forexpedia/Fed) said but let’s go through the dollar’s itinerary yesterday from start to finish shall we? 

  Economic reports might have revved up the market’s negative risk sentiment, sending the dollar on its early rally. The non-farm labor productivity index for the second quarter revealed a 0.9% decline in the general level of efficiency by American workers, falling short of the 1.0% consensus. Aaack! Its implication that fewer employees got wage increases compared to the previous quarter was supported by the puny 0.2% rise in the Unit Labor Cost Index, which disappointed the 1.5% forecast.

  Then, we heard from IBD that consumers remain pessimistic about the economy’s future with its consumer optimism printing at 43.6, missing the 45.00 mark. 

  After that, it was the Fed’s turn to run the dollar’s show. It may surprise you to know that the central bank didn’t say anything that analysts didn’t brace for. But I guess what made the difference in yesterday’s price action was that the words came straight from the horse’s mouth. Here’s the shizamanizzle of what happened.

  The Fed announced that it will keep the country’s [interest rates](http://www.babypips.com/forexpedia/Interest_rates) at 0.25% and implied that it may keep borrowing costs at that level for a while. Why? Well, according to the FOMC, economic recovery has slowed and [inflation](http://www.babypips.com/forexpedia/Inflation) pressures are barely even felt. It probably figured that there’s almost nothing to sink its interest-hiking-teeth into. 

  The central bank also stated its game plan to spur economic activity by using maturing mortgage bonds to buy Treasury debt. Doing this would increase money supply and putting it into context of the country’s low interest rates, the Fed hopes to get the US economy back in the track of recovery. I’m sure my buddy [Forex Gump](http://www.babypips.com/blogs/piponomics/) will talk more about the FOMC statement in one of his blogs so watch out for that.

  Hmm, are we really seeing fundamentals dictate price action now? Err, I’m really tempted to say yes but I think we still need to gather more evidence to prove this. And you know what, we could start with the country’s trade balance report for June which is on tap today! At 12:30 pm GMT, analysts are expecting to see that [imports](http://www.babypips.com/forexpedia/Imports) outpaced [exports](http://www.babypips.com/forexpedia/Exports) by 42.3 billion USD. If the dollar tumbles down the charts if the actual figures come out worse than the forecast, we may be one step closer to proving our theory. So be on your toes my friends and may the pips be with ya!