Daily Economic Commentary: United States

Trading Discussion News and Economy
388

Make way for the king of the hill! Yesterday the pip-DJs got them traders fallin’ in love with the Greenback again as risk aversion continued to dictate the markets’ beat. Though the scrilla gave away 56 pips to the yen, it was able to gain 143 pips on the euro. The Greenback even managed to post a 35-pip gain on the franc!

Aside from its safe-haven status, positive economic reports in the U.S. might have also helped polish the dollar’s image. The Chicago PMI report clocked in at 62.5 when analysts only pegged the figure at 60.1.

This signaled improving demand for the manufacturing industry, which might help offset the weak housing demand. You see, the S&P home prices report only showed a 0.6% growth for the month of September, its slowest pace in eight months.

Meanwhile, the Central Board’s consumer confidence report also surprised to the upside when it printed at 54.1. Apparently, increases in both the “present situation” and “expectation” components helped push the data to its highest level since June.

Check out our parade of red flags today to see if the dollar can rock the charts for another day. At 12:30 pm GMT the Challenger job cuts report will be released, followed by the ADP non-farm employment change at 1:15 pm GMT. Both reports will be closely watched as they can give clues to the big NFP report this Friday.

At 3:00 pm GMT we’ll also see the ISM Manufacturing PMI. The index figure for 400 purchasing managers in the manufacturing industry is expected to improve to 56.5 from its 56.9 figure last October, but a higher figure might push the dollar higher in the charts.

Then at 7:00 pm GMT the Fed will release its Beige Book report, a report of 12 Federal Reserve banks that usually helps the FOMC make its interest rate decisions. The last act will be the Treasury currency report. The statement could be a big-hitter as it usually lists the countries that the Treasury considers as manipulators. Duhn duhn duhn duhn.

Don’t let me catch you snoozin’ on these reports!

389

Improved risk appetite gave the higher-yielding currencies enough courage to gang up on the Greenback yesterday, forcing it to choke up some of its recent gains. EUR/USD bounced from the 1.3000 area and reached a high of 1.3182 while GBP/USD rebounded from a low of 1.5485 to a high of 1.5649.

It seems that traders are no longer getting goosebumps from ongoing debt concerns after credit spreads in Europe started to ease, reflecting how lenders are no longer so reluctant to loan funds to heavily indebted nations. Strong economic data from China, Germany, and the U.K. also helped convince traders to take on more risk.

U.S. data also came in better than expected, providing more fuel for the risk rallies. The ADP non-farm employment change revealed that private hiring jumped by 93,000 in November, which was higher than the 70,000 forecast and the previous month’s 82,000 figure. Since this report is usually considered a preview of the upcoming non-farm payrolls report, traders are probably looking out for better than expected U.S. employment figures on Friday.

The ISM manufacturing PMI also beat expectations, landing at 56.6 instead of 56.4. Since the reading for November is still safely above the 50.0 mark, it indicates that the manufacturing industry expanded during the month. However, a comparison to the October reading of 56.9 shows that the expansion was slightly slower last month.

For today, the U.S. is set to release the initial jobless claims report at 1:30 pm GMT and the pending home sales figure at 3:00 pm GMT. Weekly claims are expected to be at 425,000, which is higher than the previously seen 407,000 first-time jobless claims. This would mean that more and more individuals keep filing for unemployment claims each week, and a worse than expected figure could undermine any improvements in the soon to be released NFP reading.

Meanwhile, pending home sales are expected to post another decline for October. After seeing a 1.8% drop in September, pending home sales are estimated to be down by 0.7% in October. A much weaker than expected figure could be bearish for the Greenback since weaknesses in the housing market could further delay the Fed from tightening.

390

Tsk tsk. The Greenback shook its head in frustration yesterday as it suffered another round of losses against its major counterparts. Risk appetite, boosted by a good turnout in the Spanish bond auction, allowed higher-yielding currencies to clobber the safe-havens. Because of that, EUR/USD was able to sustain its rally all the way up to a high of 1.3248.

Economic data from the U.S. was mixed as a bag of nuts yesterday, when pending home sales posted a surprise leap while jobless claims failed to meet expectations. More Americans filed for unemployment claims for the first time last week, indicating weaknesses in the labor market. The figure landed at 436,000, which was higher than the estimate of 425,000 and the previous reading of 410,000. As Forex Gump mentioned, this can’t be good for the U.S. economy, now that a huge number of jobless claims are about to expire.

The good news is that pending home sales chalked up an impressive 10.4% gain, even when the markets were expecting a 0.7% decline. This unexpected gain erased some of the losses in the past month, suggesting that the housing market is starting to recover. Whether this rebound will last, only time can tell.

Today is NFP Friday, which means that you should be ready for some wild price action during the U.S. session. Net jobs growth is expected to be up by 143,000 in November, slightly slower than the 151,000 rise in employment seen last October. Still, a gain is a gain, right? If the NFP figure beats expectations and even knocks the unemployment rate down from the 9.6% level, the Greenback could have a chance to win back some of its recent losses. Stay tuned for the actual report due 1:30 pm GMT.

The NFP might be exciting an all, but don’t forget that the ISM non-manufacturing PMI is also due today. This report is expected to print an improvement from 54.3 to 54.7 in November, reflecting a faster expansion in the services industry. A strong figure could spark a dollar rally so watch out for the actual release at 3:00 pm GMT.

391

BOOOOO!!! The markets’ boos for the Greenback were as loud as the Cavs fans’ boos for Lebron last NFP Friday when employment reports released from the U.S. painted a gloomier picture for the economy. USD/JPY plunged 118 pips to its 82.71 closing price, while EUR/USD soared by 188 pips to 1.3411.

Last Friday’s big NFP report shocked the markets when it only printed 39,000 additional jobs in November after analysts already pegged the number at 140,000. The unemployment rate also unexpectedly jumped to 9.8%, a seven-month high, and supported the belief that the Fed would stick to its 600 billion USD quantitative easing program. The factory orders reports, too, showed a downside surprise at -0.9% in October. Since these discouraging numbers followed the recent positive upticks in other reports, traders were easily spooked into selling the scrilla.

Good thing that a couple of reports eased the sting for the dollar. Though the average hourly earnings didn’t show any growth, the ISM non-manufacturing data clocked in at 55.0 from its 54.3 figure in October, with the gauge of hiring reaching its highest level since the economy fell into recession. There were also reports that the depressing employment numbers were just distorted by seasonal fluctuations, and would get back in shape over the next few months.

We’ll see if more traders will see the glass half full this week when a series of economic reports are released. Fed Chairman Ben Bernanke will start the week for the U.S. with his interview on monetary policy on CBS at 12:00 am GMT. Then, later in the day, the semi-annual Treasury currency report will be released. The data usually reviews global exchange rate policies and central bank actions around the world, so don’t even think of missing this one!

Other economic hotshots due this week include the unemployment claims on Thursday at 1:30 pm GMT, the trade balance report on Friday at 1:30 pm GMT, and the preliminary University of Michigan consumer sentiment data on Friday at 2:55 pm GMT.

Stick around for these reports, will ya?

392

The dollar bulls and bears took a chill pill yesterday when only Fed Chairman Ben Bernanke took center stage in the U.S. EUR/USD dropped by 75 pips after hitting an intraday low of 1.3246, and USD/JPY only moved a pip higher at 82.67. Meanwhile, GBP/USD dropped to an intraday low of 1.5656 before leveling off to a 48-pip loss.

In his speech in CBS 60 minutes yesterday, Bernanke cautioned that it is possible for the Fed to stretch its wallet and spend more than the QE2’s 600 billion USD budget. But before the markets’ feathers got too ruffled, he also said that the Fed could raise its interest rates if necessary. Talk about playing it safe!

No major economic reports can help us crack the Fed’s straddling code today, but keep your eyes peeled for other reports on tap. The IBD/TIPP economic optimism data will be released at 3:00 pm GMT. The report is expected to improve to an index figure of 48.3 from November’s 46.7, but a number of 50.0 or higher could indicate optimism.

At 8:00 pm GMT the consumer credit report will also hit the markets. Analysts estimate the value of outstanding credit to drop by 0.9 billion USD from its 2.1 billion USD figure in September.

Don’t miss out on any opportunities today, folks!

393

Score another one for the Greenback! It recorded its second win against the euro this week as Obama was able to strike a tax deal with Republican leaders yesterday. As a result, EUR/USD fell from its intraday high of 1.3401 and didn’t stop until it closed at 1.3274.

The dollar actually didn’t begin to rally until midway into the New York session. Since yesterday’s releases were lightweights, the markets’ reactions were heavily influenced by political developments.

Yesterday, Obama and Republicans came to an agreement that would allow an extension of tax cuts for all income groups over the next two years. The compromise also includes extended unemployment benefits, a payroll tax cut for employees, and tax credits for businesses.

Now, this isn’t just Obama’s idea of an early Christmas gift. These tax cuts were made to boost the economy and lighten the financial burden of the average Joe. Of course, this will probably result in lower government tax revenues. But judging by the way the markets reacted yesterday, most believe this will ultimately be positive for the U.S. economy. They say this will pay off in the form of faster growth and higher employment.

No hard-hitting releases due from the U.S. today. In the meantime, keep tabs on risk sentiment as we’ve already seen how it can change on a dime! Remember, when risk sentiment turns sour, it’s time for Greenback power!

394

Who did what?! With the lack of economic reports in the U.S. yesterday, the dollar’s price action was as mixed as a bag of nuts. The scrilla gained 11 pips against the euro and 52 pips against the yen, but lost 38 pips to the pound and 11 pips to the franc. What gives?

Yesterday the Greenback danced the cha-cha with its major counterparts as analysts scrambled to analyze the economic impact of U.S. President Barrack Obama’s decision to extend the Bush-era tax cuts for two more years. Hmm, I just bet that my geeky brotha Forex Gump has something to say about that! As for the markets, the U.S. stocks also showed mixed reactions, while the bond yields continued to skyrocket in the charts.

Maybe the unemployment claims report today at 1:30 pm GMT will tell us more about the need for more economic stimulus in the U.S. The report will be closely watched since the NFP data a few days ago shocked the markets with its disappointing figures. See if the number of jobless claims continues to tread above the 400,000 level!

The monthly wholesale inventories will also be on tap today at 3:00 pm GMT and a figure higher than the 1.5% growth last September might also support the dollar.

Stick around for these reports, kids!

395

The scrilla danced another dizzying number yesterday as it ended the day with mixed results against its major counterparts. The dollar lost to the lower-yielding currencies like the yen and the franc, but gained 41 pips on the pound and 22 pips on the euro.

The Greenback took a back seat against its major counterparts yesterday despite the release of the better-than-expected unemployment claims report. The data clocked in 421,000 jobless claimants for last week, a bit below the 438,000 figure two weeks ago.

Too bad the currency bears hungrier were than the bulls yesterday, as traders passed off the data and focused on the pip parties in the euro region and in China.

The dollar will have a shot at being the life of the party again today when the trade balance report is released at 1:30 pm GMT. Markets are pegging the trade deficit to narrow down to 43.5 billion USD from September’s 44.0 billion figure, but keep your eyes peeled for any surprises!

The preliminary version of the University of Michigan consumer sentiment report is also on tap at 2:55 pm GMT. The report is one of the leading indicators of consumer spending, so a number higher than November’s 71.6 index figure might give the Greenback some support.

Last to hit the forex scene is the U.S. Department of Treasury’s federal budget balance report. The government’s budget deficit is projected to narrow down to 129.8 billion USD from October’s 140.4 billion USD figure.

End the week with full pip pockets, my young forex hotshots!

396

Despite seeing better-than-expected economic results from the U.S., the USD was unable to gain traction against most of its major counterparts. EUR/USD remained steadfast and refused to give in to dollar bulls as it closed almost unchanged at 1.3228.

All big U.S. releases were in the green last Friday. First, import prices rose 1.3%, up from 1.0% in the previous month, which should help calm fears of deflationary threats.

Second, the trade balance showed that the U.S. trade deficit shrank from 44.6 billion USD to 38.7 billion USD, beating the expected 43.8 billion USD by a mile. The U.S. posted its second favorable monthly report in a row as exports recorded broad-based gains. Exports to Mexico, Europe, and China even reached record-breaking figures.

And even the University of Michigan consumer sentiment report showed a better-than-expected reading of 74.2, up from 71.6 last month.

Positive data and no gains? What gives?

Apparently, markets are still very cautious about the outlook for the U.S. economy. Remember early last week, when Obama announced tax cut plans? Well, many believe this is a big gamble on the part of the U.S. as the economic boost this is expected to generate may be countered by lower government revenues. Obviously, this could trouble the country’s finances even further.

This Tuesday should clarify a few issues that investors are dying to settle. It’s gonna be a big—no, HUGE!—day not just for the USD, but for forex trading as a whole!

The U.S.’s most recent retail sales data is supposed to hit stands at 1:30 pm GMT. Analysts say we’ll probably see a 0.6% rise for November, which is just half the growth seen in October. Since consumer spending can trigger sustained economic growth, expect the dollar to rise in the event results come out better than expected. Who knows, maybe holiday shopping sales could deliver an upside surprise.

Hours after that, at 7:15 pm GMT, we’ll finally get what we’ve all been waiting for… The FOMC statement! Through this event, the Fed is able to communicate its monetary policies. Now, interest rates will probably remain steady at less than 0.25%, but the committee will also discuss the economic conditions that influenced its decision, so it’s definitely worth catching.

397

Move over, Greenback! It’s time for the other major currencies to take center stage! Yesterday, the Greenback clocked in major losses across the board on the news that China did not raise interest rates over the weekend. China’s decision sparked a huge risk rally, causing EUR/USD to rise more than 200 pips to 1.3400 and USD/CHF to fall to its lowest level in one-month to .9650. Low liquidity was also a big factor in pushing price action strongly in one direction.

Does yesterday’s move mean that we’ll be seeing dollar weakness in the days to come? If I were you, I’d hold off on making definitive conclusions for now, as there are a lot of data coming out today that could change all this. Let’s take a look at what the U.S. economic calendar has to offer…

At 1:30 pm GMT, the U.S. will release two important reports, namely the producer price index (PPI) and the retail sales report.

The PPI is expected to climb 0.6% for November, slightly higher than the 0.4% increase seen in October. The retail sales report, on the other hand, is slated to show a 0.6% rise only, half the increase seen the month before… This is quite odd, considering that consumers usually shop more as the holiday approaches! In any case, let’s wait and see how the dollar reacts to the actual figures.

The more important news event, the Fed’s announcement on interest rates, will come at 7:15 pm GMT. It is widely expected that the Fed will keep rates steady, so the focus will turn to the accompany statement. If the Fed starts talking about expanding its quantitative easing program again, we would probably see the dollar continue to get sold off!

398

My my, it looks like fundamentals are in the US dollar’s favor! Yesterday, the dollar was able to pocket some gains from its major counterparts as strong economic figures from the U.S. were released. Will today’s set of economic reports spark another dollar rally?

Consumer spending, inflation, and business inventories. All these U.S. data came in much better than expected yesterday, allowing the Greenback to push for some gains. Retail sales clocked in a 0.8% increase, a couple of notches higher than the 0.6% estimated rise. The core version of the report printed a 1.2% uptick, beating expectations of a 0.7% climb. It sure looks like Joes and Janes started their holiday shopping early!

Aside from that, producer prices posted a 0.8% rise for November while core producer prices saw a 0.3% rise. This signals that inflation probably rose at a healthy pace during the month since rising producer prices are often passed on to consumers.

Lastly, business inventories were up by 0.7% in October, less than the expected 0.9% increase. A smaller increase indicates that businesses will need to spend more in the future in order to replenish their stockpiles. More business spending leads to faster economic activity of course, which is good for the dollar.

Today, the U.S. is set to release its CPI report for November. Judging from the better than expected PPI figures released yesterday, the Greenback might be in for another pleasant surprise from the inflation report. The headline figure is expected to print a 0.2% uptick while the core version could show a 0.1% rise. Stay tuned for those at 1:30 pm GMT.

Also due today is the Empire State manufacturing index, which shows whether manufacturing conditions improved or not in the concrete jungle where dreams are made of. After printing a disappointing -11.1 reading in November, the index is expected to land back in the positive territory and print a 4.7 figure. A better than expected figure could provide another boost for the dollar so make sure you watch out for the actual release at 1:30 pm GMT.

At 2:00 pm GMT, the U.S. will release the TIC long-term purchases report. This could show that purchases of U.S. securities rose from 81.0 billion USD to 82.3 billion USD in October. A higher figure would reflect stronger demand for the U.S. dollar.

Later on, the capacity utilization rate and industrial production figure are due. Capacity utilization is expected to rise from 74.8% to 75.1% in November while industrial production is projected to be up by 0.4% after stalling in October. Watch out for those figures at 2:30 pm GMT.

399

Everybody, make way! Dollar comin’ through! Yesterday, we witnessed the mighty dollar muscle its way through forex markets as risk aversion hit markets yet again. It gained against almost all of its major counterparts, with EUR/USD falling 160 pips and GBP/USD taking a monstrous 237-pip dive.

A warning from Moody’s about a possible downgrade of Spain’s credit rating sent shockwaves through the markets and boosted the dollar up yesterday. Like an itch you can’t seem to scratch, concerns about the outlook for the global economy have risen again, causing investors to abandon “riskier” assets and seek shelter in safe haven currencies like the dollar. Adding to that, higher U.S. yields also helped make the dollar more attractive yesterday.

Sadly, data published by the U.S. yesterday didn’t help improve risk appetite.

First, we learned that inflation remains subdued in the U.S., which of course, lessens the likelihood of a rate hike in the near future. Last month’s CPI report showed a 0.1% rise in prices, falling short of the expected repeat of the 0.2% increase we saw in October.

The Empire State manufacturing index, on the other hand, came in much better than expected and printed a reading of 10.57, more than double what was forecasted. Apparently, conditions in the manufacturing sector have improved a lot since they earned a reading of -11.14 in November.

A few minutes after the Empire State survey was released, the tables turned again as the U.S. released another disappointing report. TIC long-term purchases dropped from 77.2 billion USD to 27.5 billion USD instead of rising to 51 billion USD as forecasted.

The industrial production and capacity utilization report capped off the day with a bit of positive news, but it was far from enough to improve risk appetite. Industrial production rebounded from the 0.2% decline we saw in October to show a growth of 0.4% last month and beat forecasts for a 0.3% rise. Capacity utilization joined in and printed a utilization rate of 75.2%, up from 74.9% in the previous month.

We’ve got several reports to keep an eye on today at 1:30 pm GMT… which means potential for plenty of action!

First, we’ve got housing market data on tap. The latest building permits report is due to show a rise in the annualized number of new buildings authorized for construction from 550,000 to 560,000. Housing starts are also expected to improve from an annualized number of 520,000 to 550,000.

Next, we’ve got the weekly unemployment claims data which is expected to show a total of 425,000 initial claims, up from 421,000 in the previous week.

To end our day at 3:00 pm GMT, we’ll take a look at the Philadelphia Fed manufacturing index, which surveys manufacturers in Philadelphia and gauges industry conditions. The index is expected to lower its reading from 22.5 to 15 for this month, but a lower-than-expected figure could shake the markets and trigger another round of risk aversion.

400

Steady like a rock was the USD yesterday as a set of mixed reports had it chillin’ like it was on vacation! EUR/USD was unusually quiet and closed just 17 pips higher at 1.3237 while USD/JPY finished the day 25 pips lower at 84.02.

If you took a look at yesterday’s releases, you might have noticed that a couple of the reports did not meet expectations. First, we learned that the current account deficit expanded from 123.2 billion USD to 127.2 billion USD in Q3, overshooting the expected deficit of 126 billion USD.

Then we found out that the annualized number of building permits issued declined from 550,000 to 530,000 instead rising to 560,000.

But this disappointing piece of data was countered by the simultaneous release of a better than expected housing starts figure. November’s results showed that the annualized number of housing starts rose from 530,000 to 560,000, surpassing forecasts by 10,000.

The weekly initial claims data, which was expected to come in at 425,000, also turned out better than expected. It revealed that only 420,000 individuals filed for unemployment benefits, down from 423,000 the previous week.

No doubt though, the icing on the cake was the Philadelphia Fed manufacturing index. In December, the index rose from 22.5 to 24.3 to surpass pessimistic forecasts for a reading of 15. The details of the report showed that manufacturers are feeling more confident about their financial positions and about the outlook for the economy over the next 6 months. An improvement in most of the underlying components was also noted, though a drop in employment raises a bit of concern. It seems the U.S. can’t seem to shake off its labor market woes.

No noteworthy reports from the U.S. today, so start your weekend early… Just kidding! You should know better! Just because we won’t have U.S. data to trade doesn’t mean the markets will be dead. Check out what the reports the euro zone has to offer today. Maybe they’ll trigger another round of risk aversion that will send the USD flying!

401

The dollar’s scorecard during Friday’s trading was as mixed as reviews for Tron:Legacy. Although it lost 15 pips to the yen and six pips to the Aussie, it was able to bag 116 pips from the pound as GBP/USD closed at 1.5519 after tapping its 3-month low at 1.5454. EUR/USD also ended the week in favor of the dollar at 1.3185, down 53 pips from its opening price.

So what’s the lowdown on the dollar’s performance?

Economic gurus are saying that perhaps renewed concerns over Europe helped the dollar rally but the U.S.’s fiscal problems are keeping investors from completely going gaga for the currency.

On the economic front, we only had the third-tier leading indicators report from Conference Board last Friday. The composite index based on ten economic indicators implied that the economy is doing all right when it came in as just as expected with a 1.1% uptick for November, following the 0.4% growth we saw in October.

Our economic calendar is blank for U.S. data today and tomorrow, but this doesn’t mean we can all go lollygagging in the snow all we want. No sir! Keep an ear out for reports from the dollar’s counterparts. Remember that the currency usually rallies in times of risk aversion.

On Wednesday the third reading of the GDP report for the third quarter, October’s FHFA house price index, and existing home sales report for November will be on tap.

And it looks like the dollar is anticipated to rally with these data based on their forecasts!

Analysts are expecting to see an upward revision to 2.8% in the GDP report from 2.5% which was reported during its second reading. On the other hand, house prices are seen to have declined at a much slower pace during the month with the consensus up at -0.1% compared to September’s -0.7% reading. Lastly, the market is bracing to see that 4.71 million homes were sold during the previous month.

That’s all for today folks. Happy trading!

402

It was an unusually quiet day for the Greenback yesterday. With no U.S. reports to dictate direction, the Greenback didn’t know where to go! It dropped against the yen, Swissy, Aussie, and Kiwi, but rose against the euro, pound, and Loonie. It doesn’t get more mixed than that!

Unfortunately, it looks like we only have more of the same to look forward to today. No hard-hitters again! Is everyone out on vacation already???

For now, you may want to see what other parts of the world have to offer. Japan is scheduled to announce its monetary policy statement today. And just across the border, Canada is due to release its latest CPI and retail sales data.

So you see, we’ve still got plenty of potential market movers today. Who knows, we might even see big, sharp breakouts after yesterday’s dull action.

403

With no economic catalyst to direct their movements, investors were left as confused as a chameleon in a bag of Skittles! It should come as no surprise then that the Greenback gave another mixed performance on the charts. It edged out the euro, pound, and Loonie, weakened against the Aussie, Kiwi, and Swissy, and had a stalemate against the yen.

As if the low liquidity the holidays bring wasn’t enough, the past couple of days have been duller than usual since we haven’t had any catalysts for movement. No U.S. reports, no big developments, no nothing!

But after a quiet start to the week from the U.S., we’re finally gonna get our first taste of substantial U.S. data.

Today, we have got a trio of potential market-movers in the release of the quarterly GDP, existing home sales, and house price index data.

At 1:30 pm GMT, we take a look at last quarter’s final GDP figure. GDP was last estimated to have grown 2.5% in Q3. But because of an unexpected inventory growth, this figure may be revised upwards to 2.8%.

Soon after that, at 3:00 pm GMT, we’ll have housing data on our tables. Existing home sales is expected to have picked up from an annualized number of 4.43 million to 4.75 million last month. If actual results match expectations, it would mark the highest level of existing home sales for the second half of 2010, and would help restore a bit of confidence in the housing market.

Also due today at 3:00 pm GMT is the FHFA house price index. Will we see a significant rebound from the 0.7% decline in house prices that we saw in September? We probably won’t see an uptick, but many are at least expecting the month-on-month decline to soften to 0.2% in October.

There you go, kids! Now go out there and make some pips!

404

Just like Reese Witherspoon’s movie “How Do You Know”, the dollar also flopped in yesterday’s trading as it lost to all of its major counterparts except for the pound and the Kiwi. EUR/USD closed 4 pips higher at 1.3099 while USD/JPY ended the day 19 pips lower at 83.54. Heck! AUD/USD even took another shot at parity!

So what got traders booing the dollar? Word on the street is that it was yesterday’s roster of disappointing economic reports. Hmmm, let’s take a look at them, shall we?

First there was the GDP report for the third quarter. We saw an upward revision to 2.6% in the final reading of the report after it was announced that the economy only grew by 2.5% in its Preliminary version. This should have been bullish for the dollar if only it didn’t fall short by 0.2% of what analysts had predicted.

Then there was the existing home sales report which showed that the country’s housing market is growing, with the figures for November higher at 4.68 million than the 4.43 million we saw in October. Too bad it missed the consensus forecast of 4.75 million.

The better-than-expected house price index for October might have not been enough to offset the negative vibes brought about by these figures which point to sluggish economic growth. It was reported that house prices increased by 0.7% during the month and overshot the 0.1% decline that the market was bracing for.

See if the new home sales report will be able to paint a better picture of the housing market to us. Forex junkies are expecting to see that 300,000 homes were sold during November to follow the 283,000 increase we saw in October.

That will be announced later at 3:00 pm GMT, but at 1:30 GMT the durable goods and personal spending reports for October will be on tap. With a -0.5% forecast, it looks like analysts are expecting the soft economy to have taken a toll on the purchase orders placed with manufacturers. On the other hand, a smaller uptick of 0.2% compared to its previous 0.5% increase is projected for October’s personal spending report as a decline in average hourly wages during the month could have weighed down on income.

Then we’ll have the University of Michigan Consumer Sentiment report for December at 2:55 pm GMT. The consensus is for an upward revision to 74.7 from its earlier reading of 74.2.

405

It was a cold, cold New Year’s Eve for the dollar this weekend as it found itself on the back foot against most major currencies. EUR/USD, for one, managed to climb all the way above 1.3400 again after testing 1.3100 for two whole weeks. Meanwhile, GBP/USD, traded as high as 1.5658 during the holidays before settling just a couple of pips below 1.5600.

Apparently, traders are starting to become more optimistic for 2011. They believe that the global economic recovery will gain traction this time around, which is propping up risk appetite, much to the dismay of dollar-lovers. Whether this bearish sentiment towards the dollar will continue for 2011 is still up in the air, as we’ve got a boatload of very important economic reports coming out this week.

Today, at 3:00 pm GMT, the ISM manufacturing PMI will be released. The expectation is for a reading of 57.1 for the month of December, which is slightly higher than the 56.6 figure seen the month before. Do note that five months out of the last six, the results of the survey has gone above forecast… This means that we could see the same today, which could give a reason for traders to sell the dollar again on account of risk appetite.

On Tuesday, we’ve got the minutes of the FOMC’s November meeting. The current issue among the FOMC members is the efficacy of QE2. If the minutes reveal that they’re starting to think of QE3 or even QE4, then be extra careful in holding on to dollar long trades!

Then, on Wednesday, at 1:15 pm GMT, we will be seeing the ADP’s version of the non-farm payrolls. The ADP report is usually seen as a “preview” of the more important U.S. employment report on Friday. In other words, traders consider the ADP as an indication whether Friday’s figures will be good or bad.

The forecast for the ADP report is a net gain of 101,000, while the U.S. employment report, which will be released on Friday, is predicted to show a growth of 136,000 jobs. Meanwhile, the unemployment rate is expected to have dropped by 0.1% to 9.7% in December.

Phew, that’s quite a lot to watch out for this week, especially after the long holiday! With liquidity still low, the forex market may be slow to gain traction and may experience volatility spikes here and there, so be extra careful with your trades!

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Yesterday was a wacky, wacky trading session for the dollar. The currency started off with a nice little rally, posting some gains against other major currencies. Unfortunately, the move up did not last long as risk appetite soon picked up. After EUR/USD had hit an intraday low of 1.3250 on dollar strength, the pair soon fought back and ended the day at 1.3350, unchanged from its opening price.

The only significant data release yesterday, the ISM manufacturing survey, came with no surprises. The survey printed a reading of 57.0, higher than December’s figure, but exactly as expected.

Today, focus will turn to the FOMC to give the dollar direction. At 7:00 pm GMT, the FOMC will release the minutes of its November meeting. As I’ve said yesterday, the hot topic among the FOMC members is whether or not QE2 is effective. Pay close attention to the report, as any hints additional stimulus measures in the form of quantitative easing could really put the hurt on the dollar!

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With positive data on its side, the dollar was a rocketeer in yesterday’s trading, winning against all of its major counterparts save for the pound. It gained the most against the Swissy when USD/CHF ended the day 145 pips higher at .9489. Meanwhile, EUR/USD fell from its intraday high of 1.3434 to close at 1.3298 with a 53-pip loss.

It was reported yesterday that factory orders placed with manufacturers increased by 0.7% in November, overshooting the -0.1% consensus and paring the decline it posted in October. Boo yeah! And on top of that, total vehicle sales also increased in December by 12.6 million USD which was 300,000 USD more than what the market was expecting.

However, despite the recent roster of positive economic reports that we’ve seen from the U.S. economy, it seems like the Fed still has no plans of shedding its dovish feathers for hawkish ones.

In the FOMC minutes released yesterday, the Fed hotshots said that improvements in the economy are still insufficient. With that, some economic gurus say that we may not hear Fed Reserve Chairman Ben Bernanke holler a rate hike until the end of the year!

Perhaps a better-than-expected NFP report for December will convince Big Ben and his buds to smile a little for the economy. That’s due on Friday at 1:30 pm GMT with a 140,000 forecast. You can better anticipate the report if you tune in to the ADP Employment Survey and ISM Non-Manufacturing report on tap later.

At 1:15 pm GMT, all eyes will be fixed on the ADP’s data on the labor market with the expectation that 100,000 jobs were added in December, to follow the 93,000 increase we saw in November. Then at 3:00 pm GMT, we’ll get dibs on the ISM Non-Manufacturing PMI which is seen to come in at 55.8. The market will most probably be eyeing the employment component of the report which is said to have a strong correlation to NFP figures.