Daily Economic Commentary: United States

Trading Discussion News and Economy
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Yesterday the dollar made a huge pip-slosion on the charts, posting three-digit wins against most of its counterparts, thanks to better-than-expected data. Boooom!!! EUR/USD ended the day 142 pips lower at 1.3156, while USD/JPY and USD/CHF skyrocketed 121 pips and 171 pips, respectively.

Let’s briefly go through the numbers, shall we?

According to the ADP Employment Survey, 297,000 jobs were added into the labor market in December and made the 100,000 consensus look puny. Ha! On the other hand, the ISM non-manufacturing index came in at 57.1 and beat the 55.7 forecast.

Whoohoo! So does this mean that tomorrow’s NFP report will also get the dollar ka-powing pips out of its counterparts? Err, maybe not.

Going through ISM’s report we see that despite service sector activity growing at the fastest rate since May 2006, the employment component of the report declined. Yikes! So it may be best to keep this in mind when you trade the NFP which is due tomorrow at 1:30 pm GMT. Remember that analysts are anticipating the report to come in at 140,000.

You should also tune in to the initial jobless claims report on tap at 1:30 pm GMT later to get a better picture of the U.S. labor market. Economic gurus are expecting to see that 405,000 people filed for unemployment benefits in the last week, which is higher than the previous figure we saw at 388,000.

Don’t be too hasty in betting your pips, aight? Peace out!

409

Is the dollar’s rally losing steam? The Greenback managed to post gains against its major counterparts for the third day in a row yesterday. Although it still gained 140 pips on the euro and 37 pips against the pound, it only inched up by 6 pips against the yen and even lost 8 pips to the franc.

Maybe the currency bulls are losing steam ahead of the big Non-Farm Payrolls report today. Recall that investors have been buying up the scrilla like it’s an iPad when the ADP employment figures put market estimates to shame. Aside from some economic hotshots thinking that a better-than-expected NFP report is already priced in, others also thinking that the NFP figure might not be as awesome as many expect.

Of course, it also doesn’t help the dollar that U.S. Treasury Secretary Tim Geithner is urging the Congress to loosen up its pockets. In a letter he sent yesterday, he warned that the debt limit of 14.3 trillion USD could be reached as early as the end of March if the debt ceiling isn’t raised. The national debt is currently at 14.01 trillion USD. The letter signaled that the U.S. economy needs more financial help than expected, which rained on the bulls’ parade.

Let’s see if the Greenback can bring back the pip love today when the big NFP report is released at 1:30 pm GMT. Jobs unrelated to the farming sector is expected to increase by 150,000, but a significantly higher number could energize the bulls once again.

The unemployment rate report is also due today at 1:30 pm GMT together with the average earnings report for December. Let’s hope the figures don’t surprise to the downside like what happened last month!

The last act belongs to Ben Bernanke when he testifies in front of the Senate Budget Committee in Washington DC at 2:30 pm GMT. As the U.S. Fed Chairman, what he has to say has a lot of weight in markets, especially after the release of the NFP report.

Be careful in your trades today, fellas!

410

The dollar’s scorecard was as mixed as the reviews for Nicholas Cage’s movie, “Season of the Witch”. It stacked up its gains from the euro to 438 pips for the week when EUR/USD closed at 1.2910. On the other hand, it lost 28 pips and 72 pips to the yen and the pound, respectively.

If you were busy partying last Friday, you probably missed the intense moves of the charts that came with the NFP report. It fell short of the 150,000 consensus when it only printed an additional 103,000 payrolls to the labor market in December, but it wasn’t all bad!

For one, the figure for November was revised up to 71,000 after being initially reported at 39,000. Then the unemployment rate inched lower to 9.4% during the month from 9.8% in November. Analysts had been expecting it to come in at 9.7%.

Of course, the employment report wasn’t enough for Fed Reserve Chairman Ben Bernanke to go head over heels for the economy and holler that a rate hike is on the horizon. He continued to defend QE2 and said that labor conditions improved only a little bit. However, he did sound more positive saying that the Fed sees recovery to be moderately stronger this year.

Economic gurus think that aside from Europe’s debt crisis, the dollar’s gains will also depend on the top-tier reports we have on tap for the currency this week. So take out your pens and get ready mark your calendars kids!

Keep tabs on the trade balance report for November and the unemployment claims report for the previous week due on Thursday. Note that analysts are bracing to see that imports outpaced exports by 40.9 billon USD during the month. Meanwhile, the number of people who filed for unemployment benefits is projected to have decreased by 4,000 to 405,000 from its previous reading.

Come Friday, we’ll get dibs on the retail sales report for December. The market is anticipating consumer spending to have remained steady at 0.8%. Excluding automobiles, it is expected to have grown by 0.7%.

Industrial production for the same month will also be released along with that, and activity in the industrial sector is eyed to match its previous uptick of 0.4% for December.

Then to wrap up the week, we’ll have the University of Michigan Consumer Sentiment report. Hopes are high that consumer confidence improved in January with the index forecasted to be higher at 75.4 than its 74.5 reading in December.

Before all these, you may want to tune in to tomorrow’s IBD Consumer Optimism and wholesale inventories reports. At 3:00 pm GMT, IBD’s index anticipated to come in at 46.9 which reflects an improvement consumer sentiment in January compared to its December reading of 45.8. On the other hand, the value of goods in stock by wholesalers is seen at 1.0%.

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Just like Britney Spears’ new single, pips leaked from the dollar during yesterday’s trading as it lost to most of its counterparts. EUR/USD ended the day 72 pips higher at 1.2955 while GBP/USD closed at 1.5579 after opening at 1.5523.

Economic gurus think that the absence of reports for the dollar left traders reflecting on last week’s lower-than-expected NFP report. As I said before, although the report wasn’t all that bad, it wasn’t enough to ease worries about the U.S. economy or the global economy as a whole.

Speaking of which, some started to worry about recovery on the international economic arena getting tougher when China released its trade balance report yesterday. Analysts had been anticipating a 20.75 billion USD trade surplus for December but the report showed that exports outpaced imports only by 13.1 billion USD. This is smallest surplus we’ve seen in 8 months yo!

Remember that China was the one who stepped up to fuel growth when the U.S. was struggling and so, the worse-than-expected report might have given a few investors goosebumps. Duhn, duhn, duhn, duhn!

Anyway, for today we only have the second-tier IBD consumer optimism index for January and the third-tier wholesale inventories report for November at 3:00 pm GMT.

A figure higher than the expected 46.9 for the consumer sentiment index will probably be bullish for the dollar. On the contrary, we will need to see a lower-than-expected reading for wholesale inventories in order for the dollar to rally as this would imply future spending when businesses stock up their inventories. Note that the consensus us for a 1.0% uptick.

Tomorrow we’ll have import prices for December at 1:30 pm GMT which is eyed at 1.2%. The Fed’s Beige Book will also be on tap at 7:00 pm GMT. Stay tuned to that and get a glimpse of what the FOMC dudes will be talking about in their next meeting.

Happy trading y’all!

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Hang in there, brotha! With the lack of economic data released from the U.S. yesterday, the dollar danced to the tune of reports from abroad. The Greenback managed to gain on most its major counterparts, with USD/JPY climbing 48 pips to 83.21. Meanwhile, EUR/USD closed at 1.2981 after hitting an intraday low of 1.2905.

Global economic growth concerns kept the demand for the low-yielding dollar chugging, especially when bond auctions in the euro zone are only a few hours away.

Too bad that the bulls aren’t too confident on the U.S. economy’s growth either. No major economic report has been released since the NFP report last Friday, so the dollar bulls and bears might be waiting for confirmation on the state of the U.S. economy.

Maybe the Beige book report scheduled for release today at 7:00 pm GMT can shed some light on the economic recovery. The data shows the local economic conditions from 12 Federal Reserve banks, and is usually a big factor to the Fed’s interest rate decisions.

U.S. Treasury Secretary Tim Geithner will also be on the spotlight today as he talks about the US-China relations in Washington DC at 1:30 pm GMT. FOMC member Richard Fisher will then take the stage at 6:00 pm GMT when he talks about the limits of monetary policy in New York.

Lastly, we’ll get hold of the Fed’s budget balance report at 7:00 pm GMT. The Fed’s budget deficit in November reached 150.4 billion USD.

Stick around for all these reports, kiddos!

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No thanks to the success of Portugal’s bond auction, risk appetite was able rear its head again in the markets again yesterday, much to the dismay of the USD bulls! The U.S. dollar index, which tracks the performance of the dollar against a basket of other major currencies, fell to 80.49 from 81.25.

Portugal was able to sell 1.25 billion euros in government bonds in its auction yesterday, which gave traders reason to believe that euro zone may not need to bail out Portugal anymore.

Focus now turns to Italy and Spain, as they will have their own bond auctions later today. The success (or failure) of these bond auctions could determine whether the dollar’s fall is merely a retracement or a full-blown reversal.

In other news, the U.S. Federal Reserve’s Beige Book was released. The Beige Book revealed that all 12 Federal Reserve banks reported that economic activity in their district has somewhat improved during the last couple of weeks of 2010. Manufacturing activity increased, employment has slightly gotten better, but real estate and construction activity was “slow.” It appears that the Beige Book is just reiterating what we already know: there is growth, but it is not as fast as expected. Ho hum, nothing new there!

The economic calendar today presents a couple of important reports, all of which are coming out at 1:30 pm GMT.

First, there is the U.S. trade balance for the month of November. It is expected to show that the trade deficit increased to 40.5 billion USD from 38.7 billion USD in October. Second, there is the report on initial jobless claims. According to forecast, the number of people claiming for unemployment insurance remained unchanged at 409,000 this week.

Lastly, there’s the U.S. producer price index (PPI). A 0.8% increase is expected for the month of December, which is the same figure we saw in the previous report. The PPI is typically seen as a leading indicator of inflation, which means that higher-than-expected figures tend to cause the dollar to rise.

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Yeouch! For the third day in a row, the dollar found itself on the back foot of other major currencies due to the successful results on Spain and Italy’s bond auctions. The encouraging debt auctions helped prop up risk appetite, which caused traders to exchange their dollars for higher-yielding currencies. In just one day, the dollar gave up more than 200 pips to the euro.

Economic data from the U.S. yesterday were mixed, with the producer price index (PPI) and the trade balance beating forecasts and the initial jobless claims falling below expectations.

The PPI, which measures the change in the price of goods of services by producers, showed a rise of 1.1% in December, slightly higher than the 0.8% initially predicted. Meanwhile, the trade balance revealed that the country had a 38.3 billion USD trade deficit in November versus the 40.5 billion USD deficit forecast.

As for the initial jobless claims, it printed a 445,000 number, adding more evidence that the U.S. jobless situation is not getting any better. Recall that last week, the employment report was very disappointing too, reporting the number of jobs created was only 103,000. That’s just two-thirds of what everybody was expecting!

To recap (or the too long; didn’t read version), the dollar lost yesterday due to the successful bond auctions in Spain and Italy, but economic data in the U.S. failed to impress as they came mixed.

Today will be another fun-filled day for ya’ll as there are a lot of economic reports due that could potentially move the dollar.

At 1:30 pm GMT, the U.S. is scheduled to release both the consumer price index (CPI) and the retail sales report. The CPI is expected to show a 0.4% rise while the growth in retail sales is predicted to remain unchanged at 0.8%.

Then, at 2:55 pm GMT, the preliminary University of Michigan consumer sentiment survey will be published. The consensus is a reading of 75.5, slightly higher than last month’s 74.5. If the actual figures fail to hit forecasts, then we could see the dollar post another losing day.

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The dollar’s price action last Friday was as mixed as a glass of margarita when risk aversion played tug-o-pips with not-so-awesome economic data from the U.S. The Greenback ended the day higher against the yen at 82.98, but it also lost 51 pips to the pound and 24 pips to the euro.

News that China once again hiked its reserve requirement ratio for the seventh time in a few months suggested that the economic giant is serious in its efforts to curb economic growth, so it sparked a fresh wave of risk aversion in markets that boosted the low-yielding dollar.

Too bad the scrilla bulls weren’t so excited either as economic data from the U.S. turned out to be as disappointing as the Green Hornet’s remake. Retail sales only clocked in at 0.6% after showing 0.8% growth in November, while its core version, the data that excludes automobiles, dropped from 1.0% to 0.5%. Yikes!

Consumer prices last December also rose by 0.5%, but taking out the food and fuel consumption would only reveal a 0.1% price increase. Then, the University of Michigan consumer sentiment report further weighed on the dollar by falling to 72.7 from 74.5 in December. Good thing the industrial production report leveled off the bad vibes when it showed 0.8% increase in December, with the capacity utilization rate also climbing to 76.0%.

Let’s see if the dollar manages to get more pip-love today. The U.S. markets are closed to pay respect to my bro Martin Luther King, but FOMC member Charles Plosser is scheduled for a spotlight today at 12:15 pm. Also keep close tabs on reports from the other regions, will ya?

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With the Wall Street dudes chillin’ on my bro Martin Luther King’s day, the dollar bulls and bears weren’t able to play much with the Greenback. EUR/USD dropped by 111 pips on concerns in the euro region, but USD/JPYonly inched down by 6 pips to 82.72. Meanwhile, GBP/USD also closed 15 pips higher than its open price after dropping to an intraday low of 1.5836.

Only FOMC member Charles Plosser was able to hit the spotlight yesterday, but our deck is looking a lot more promising today. At 1:30 pm GMT the Empire State manufacturing index is set for release. The data shows the sentiment of manufacturers in New York, so a number higher than December’s 10.6 figure might do the scrilla good.

Last to hit the pip-stage today before Kanye West appears is the TIC long-term purchases at 2:00 pm GMT. Market geeks are expecting the securities purchases of the U.S. citizens to surpass the purchases of foreigners by 40 billion USD, but a higher number might signal more optimism in Uncle Sam’s economy.

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

417

You win some, you lose some. But unfortunately for the Greenback, yesterday was mostly about the latter! Except versus the Loonie and the Kiwi, it traded lower against all of its counterparts, with EUR/USD rising almost 100 pips to close at 1.3383.

No doubt, the highlight of the day for the Greenback was the release of the TIC long-term purchases report. Remember what I said about market geeks anticipating a higher figure for November? Well they were right! But even they didn’t expect to see net purchases of U.S. long-term securities grow to 85.1 billion USD, which is almost double what was forecasted.

This sharp increase gives us a direct look at how investors and demand for U.S. securities reacted in response to QE2. “QE2? Gotta get me some U.S. securities yo!” financially savvy homies across the world said.

Also noteworthy is what the Empire State manufacturing index had to say about the manufacturing industry in the Big Apple. While growth picked up and caused the index to print higher from 9.9 to 11.9, manufacturing activity still did not meet forecasts for a 12.6. Growth in new orders and shipments have led to a gradual improvement in the manufacturing sector, but it hasn’t shown enough swagger to erase concerns over the U.S.’s ailing labor market and anemic domestic demand.

Today, we’ve got housing starts and building permits data to look forward to at 1:30 pm GMT. Housing starts are anticipated to tick lower from 560,000 to 550,000. On the other hand, expect to see the annualized number of newly issued residential building permits rise from 530,000 to 560,000 when the building permits report rolls out. Let’s see if a couple of positive reports can lift the Greenback and erase yesterday’s losses!

418

Ka-blam! The anti-dollar sentiment did a Chuck Norris number and roundhouse-kicked the Greenback down against its major counterparts despite better-than-expected economic data from the U.S. EUR/USDtopped at 1.3539 before ending the day 88 pips higher than its closing price. Meanwhile, USD/JPY plunged to 82.05, and GBP/USD rose for the ninth day to 1.5988.

Traders started selling the scrilla early in the day on speculation that Obama’s meeting with Chinese President Hu Jintao would result to China giving an inch on its currency appreciation policies, which would lead to China selling the dollar.

Too bad that the scrilla bulls also didn’t like it when the meeting began to look like a staring contest. When many of them caught the vibes that there wasn’t going to be any action from the leaders of two economic giants, the bears went back to snacking on the Greenback.

With all the attention on Obama and Hu’s little [I]tete-a-tete[/I], economic reports from the U.S. failed to get its applause. Building permits rose to 640K in December after clocking in at 540K in November. Meanwhile, housing starts slipped a bit to 530K from its 550K figure in November, but permits rocketed by 16.7%. Boo yeah!

Let’s see if markets will turn the spotlight on economic data this time when the unemployment claims are released today at 1:30 pm GMT. Jobless claims are seen to go down to 422K this week, but a lower number could provide the Greenback reprieve in the charts.

The existing home sales report and the Philly Fed index reports will be released at 3:00 pm GMT. Manufacturing index in Philadelphia is expected to tumble to 20.4 in January, but a higher number could mean more optimism for the manufacturing industry.

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

419

Make way for the king of the hill! The Greenback once again flexed its pip-muscles yesterday when risk aversion in markets made it easy for the currency bulls to turn their eyes on positive economic data from the U.S. USD/JPY rocketed by 96 pips to 83.01, while GBP/USD dropped to 1.5896. Meanwhile, EUR/USD ended in a near stalemate at 1.3474 after dropping to an intraday low of 1.3396.

While the euro region is sitting on hot water yesterday on Moody’s warnings of a downgrade, the U.S. has been posting good economic results. Unemployment claims dropped to 404,000, which was a lot smaller than the expected 422,000 figure.

The existing home sales report might have also put a smile on Ben Bernanke’s face when it clocked in at 5.28 million USD in December. That’s a 12.3% jump and the largest monthly increase on record! Boo yeah!

The Philly Fed index might be the only party pooper when it dropped to 19.3 from December’s 20.8 figure, but it was mostly pushed backstage since the report also showed that manufacturing is picking up in Philadelphia.

No other report is scheduled for release for the rest of the day, but watch your charts closely for any pullbacks or break in resistance!

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The dollar was the forex world’s whipping boy as it took the fall in all dollar pairs last Friday. The broad dollar selloff saw EUR/USD finally break down resistance at 1.3500 as the pair closed 140 pips higher at 1.3614.

Despite the fact that the U.S. is beginning to print positive economic data, the dollar has been unable to get momentum on its side. It seems that investors are starting to lose hope because it seems like the Fed isn’t getting any closer to normalizing its monetary policies.

We’ve got a potentially explosive week ahead of us as the U.S. will be dumping a load of big releases starting tomorrow.

At 3:00 pm GMT, the CB consumer confidence is due. According to forecasts, January should print a reading of 54.5, a slight rise from last month’s 52.5.

Then at 3:00 pm GMT on Wednesday, we have new home sales data on tap. The annualized number of new homes sold is said to have risen from 290,000 to 302,000 in December.

After that, the spotlight turns to the Fed as it’s scheduled to give the FOMC statement and make its interest rate announcement. Listen carefully because Fed Chairman Ben Bernanke may give clues as to whether or not the Fed has plans to cut its QE2 program short. No doubt, this is the most anticipated event of the week. Catch it at 7:15 pm GMT.

Thursday will follow up with durable goods orders and pending home sales data. Durable goods orders are expected to grow by 1.6% in December, up from the 0.3% decline that November witnessed. On the other hand, pending home sales growth is expected to temper from 3.5% to 1.6% in December. Catch the core durable orders report at 1:30 pm GMT and the pending home sales data at 3:00 pm GMT.

Last but not least, the advance GDP for Q4 will come out at 1:30 pm GMT on Friday. It seems like the recent string of positive U.S. data has got analysts feeling optimistic for last quarter’s GDP. They’re predicting a solid 3.5% uptick to follow up the previous quarter’s 2.6% growth. But as you know by now, better-than-expected results are always a possibility. Expect the dollar to rally strong and hard if these releases all reveal upside surprises!

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With no fundamental data releases to support it, the dollar took some hits in the forex arena yesterday. EUR/USD continued its recent up rise, as it gained another 34 pips to close at 1.3645. Meanwhile, GBP/USD remained stuck in consolidation, trading within a range of 90 pips and closing just 14 pips higher to end at 1.6000.

The reason why the dollar lost out a little bit was thanks to increased risk appetite thanks to Mr. Jones. No, not that dude from that catchy early 90s song – I’m talking about the Dow here fellas! Thanks to some wheeling and dealing, the Dow almost hit 12,000, a figure that it hasn’t seen since just before the financial crisis.

Looking ahead, watch out for the CB consumer confidence report due today at 3:00 pm GMT. Has consumer confidence gained with the recent slew of positive news reports? Word is that the index will rise from 52.5 to 54.4 for this month’s report. Will a better than expected result boost risk appetite and leave the dollar behind? Or will the markets react by buying more greenbacks?

Then again, we might just see more consolidation before the storm that is the FOMC statement, which will be coming out late on Wednesday. In any case, be careful out there my forex friends and good luck trading the markets today!

422

Whoa, it was one crazy day for the dollar yesterday, as it moved differently across the board. While the dollar did manage to gain more than 200 pips over the pound, it edged lower against most of the other major currencies like the euro and the yen.

The U.S. dollar index, which measures the performance of the Greenback versus other major currencies, formed a doji on its daily chart, indicating that there is indecision among buyers and sellers.

Why did the dollar gain on the pound but lose against the others? Ah, that’s easy! Apparently, market sentiment was propped up by the strong demand of the European Financial Stability Facility (EFSF) 5 billion EUR bond issue and the better-than-expected result of the CB consumer confidence report (60.6 actual vs. 54 forecast). Unfortunately, the pound was unable to take advantage of the improved risk sentiment as its preliminary GDP showed that U.K. has plunged back into recession.

Today, the main event will be the FOMC’s interest rate decision at 7:15 pm GMT. The FOMC is widely expected to keep rates unchanged, so focus on the language they use instead.

Also keep an eye out for the report on new home sales. It is scheduled for released at 3:00 pm GMT and is expected to show that the annualized number of new home sales increased to 300,000 in December from 290,000 the month before.

423

Mixed results on mixed feedback! Both dollar bulls and bears had something to feed off of as positive home sales data and a dovish FOMC statement resulted in different results for the dollar pairs. While the dollar gained against the yen and Swissy, it declined versus the pound and euro, sending EUR/USD to a new high at 1.3723 before it closed at 1.3690 for an 8-pip rise.

First, the good news! Yesterday, it was revealed that new home saleswere off the charts last month! According to the latest numbers, an annualized number of 329,000 new homes were sold in December, up from 280,000 in November.

But while the fact that it exceeded forecasts for 302,000 was a pleasant surprise, we can’t say that the housing market is out of the woods just yet. New home sales are typically lagging behind other economic indicators, and gains in employment and other aspects of the economy will be needed in order to sustain the housing market’s rebound from one of the worst year’s on record.

I suppose this is one of the reasons why the FOMC statement sounded more dovish than usual yesterday. As expected, no changes were made to interest rates. But there was a notable change in the Fed. This time around, there were no dissenters! It seems even Hoenig, the lone FOMC member who voted against QE2 is getting with the program and adopting a dovish stance.

Even though the manufacturing and services industries have been showing signs of improvement, the Fed expressed concern about consumer spending. Strong consumer spending is critical to any economic recovery, and I suppose this is may explain why the Fed is hesitant on pulling the plug on its stimulus program.

More big news coming our way today. At 1:30 pm GMT, durable goods orders data will be available. Expect to see November’s 0.3% drop improve to a 1.6% rise in December.

We also have the weekly initial jobless claims number due. This time around, forecasts have the number rising from 404,000 to 407,000.

Last but not least, we have pending home sales data on tap at 3:00 pm GMT. Let’s see if the housing market can post another positive figure in this report. Analysts are expecting pending home sales growth to temper from 3.5% to 0.9%, but better-than-expected results could always give the dollar a much-needed lift.

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What a time for risk aversion to kick in! The turmoil in Egypt had the dollar strengthening against riskier currencies, but because of a soft GDP showing, it weakened against the other safe havens. EUR/USD dropped 128 pips to 1.3609 while USD/JPY fell 73 pips to 82.14.

It seems the civil unrest in Egypt has got global market players scurrying away from risky assets. What investors fear is the possibility of a shutdown of the Suez Canal, which could affect the supply of oilworldwide! Now isn’t exactly the best time for additional oil price pressure, given that many countries are already battling high levels of inflation.

In other news, investors sold the dollar off quickly immediately after seeing the headline GDP figure. GDP was softer than expected, printing a growth of 3.2%, which is below forecasts for 3.5% but is still a nice improvement from the previous quarter’s 2.6% increase.

But minutes later, the dollar was able to erase most of its losses against riskier currencies. Details of the report revealed that the economy is actually picking up steam. Personal consumption, which is critical to the recovery of any economy, managed to grow a solid 4.4% last quarter.

Change in private inventories was identified as the dead weight in GDP, but it’s actually not so bad. This only means that companies are going through their inventories quickly, and that they’ll need to stock up again in the months to come. All in all, output is back to 2007 levels!

Later today, we have a few tier 2 reports due at 1:30 pm GMT. The core PCE price index is expected to show another 0.1% rise in December, just as it did in November. Also, personal spending data is expected to rise from 0.4% to 0.6% in December.

Finally, we have the Chicago PMI, which should be available at 2:45 pm GMT. The index, which measures business conditions in Chicago, is expected to tick lower from 66.8 to 65.5.

Looking even further ahead, we have a few big reports to look forward to this week. The ISM manufacturing PMI is due tomorrow and is slated to fall from 58.5 to 57.6.

Then on Wednesday, we have the ADP non-farm employment change report at 1:15 pm GMT. Economic fortunetellers see a net increase in employment of 150,000 for the month of January, basically half that of December.

At 3:00 pm GMT on Thursday, we take a look at the ISM non-manufacturing PMI, which is anticipated to tick higher from 0.7% to 1.3%. After that, at 6:00 pm GMT, Fed Chairman Bernanke is scheduled to deliver a speech.

Then on Friday, we’ll cap the week off with the mother of all reports, the nonfarm payroll report! Economists are feeling quite optimistic about this one. They predicted a net increase of 133,000, up from 103,000 the previous month. However, they expect this to translate to a higher unemployment rate of 9.5%, up from 9.4%.

Let’s see if positive reports this week can change the Fed’s mind about its stimulus program!

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The dollar’s performance in yesterday’s trading was as mixed as reviews for my bro Jake Gyllenhaal’s movie, Love And Other Drugs. It lost to its higher-yielding counterparts, giving up the most to the pound and the euro, while gaining against the yen and the Swissy.

Yesterday’s roster of economic reports wasn’t much of an upset. In fact, the lineup was pretty good.

Only the personal income and PCE reports for December fell short of expectations.

We saw yesterday that the general level of income by consumers increased only by 0.4% and missed the 0.5% forecast. Meanwhile, the core PCE report, which is said to be the Fed’s favorite inflationbarometer, revealed that prices remained flat during the month and disappointed the 0.1% uptick that the market was anticipating.

On a brighter note, we saw that personal spending overshot the 0.6% consensus when it came in at 0.7%. The Chicago PMI also had the good vibes rollin’ when it showed that businesses in the Windy City grew at the fastest pace since July 1988! It surged to 68.8 in January from 66.8 in December and beat the 65.5 reading that analysts were eyeing.

However, a few economic gurus say that with the Fed not being in on the new talk of the town which is inflation, unlike the ECB and the BOE, we may not see the dollar show sustained swagger on the charts. Don’t worry, not all hope is lost. Perhaps a stellar NFP report on Friday will help convince Ben Bernanke and his buds to think about a tighter monetary policy.

Until then, we can tune in to what we have on tap for the dollar today.

At 3:00 pm GMT, we’ll get dibs on the manufacturing industry with the ISM manufacturing PMI. It is anticipated to come in at 57.8 following its 58.5 reading in December. Along with that, we also have data on construction spending and it is expected that activity picked up by 0.1% in December.

Watch out for better-than-expected figures as these may just allow the dollar to hustle some muscle! Remember that the currency also rallies in times of risk aversion. Good luck!

426

To say the dollar took a hit yesterday would be a tremendous understatement. It was downright pummeled by the other major currencies! Markets simply ignored the U.S.’s positive manufacturing PMI, forcing EUR/USD to rise 140 pips to 1.3831 and USD/JPY to dip 72 pips to 81.36.

Risk appetite worldwide seemed to improve a bit as the protests in Egypt didn’t escalate to more violent acts. Apparently, President Mubarak announced that he only plans to finish his term and doesn’t wish to run again in the upcoming elections.

In other news, yesterday, the ISM manufacturing PMI printed an unexpected acceleration in growth in the manufacturing sector. According to the index, which rose from 58.5 to 60.8, January recorded the fastest pace of growth in six years! Apparently, businesses are growing in confidence as they continue to expand. You know something’s definitely up if a report like that doesn’t give the dollar a lift!

Judging by the way the dollar reacted against the yen, an improvement in risk appetite might not have been the only thing weighing it down. The Fed’s hesitance towards tightening monetary policy amidst inflationary pressures may have a hand in the dollar’s recent decline as well.

Today, the spotlight shifts back to the U.S.’s labor market. Will yesterday’s surprisingly upbeat manufacturing report translate to more jobs? According to forecasts for the ADP non-farm employment report, it will! The survey is expecting a total of 148,000 new jobs in January, which is a respectable increase, but is still only about half the growth recorded in December.

Don’t you dare miss this release at 1:15 pm GMT! Another upside surprise could be just what dollar bulls need to get moving!

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Just like the U.S. labor market, the dollar received mixed reviews yesterday. It beefed up against most of its major counterparts, but was unable to overcome the pound and the Loonie. EUR/USD finally took a breather from its two-day rally and slid back 22 pips to rest at 1.3809.

When the ADP non-farm employment survey came out, word spread quickly that a net total of 187,000 jobs were added in January, exceeding expectations for a 148,000 increase.

Great news, right? Well… Not exactly. This bit of news came hand in hand with information that the 297,000 net increase we saw in December was revised downwards by 50,000. Also, the challenger job cuts report recorded a 46.1% year-on-year decline in job cuts in January.

What all these numbers tell us is that the net increase in jobs that we’re seeing isn’t due to a drastic increase in employment. Hiring remains weak, and the NET increase in employment can be attributed to the fact that more and more companies are holding back on job cuts these days. In other words, companies are holding on to their current employees rather than hiring new ones.

Maybe today’s employment data will give us a clearer preview of Friday’s NFP report. At 1:30 pm GMT, we have the weekly initial jobless claims figure due. This time around, analysts forecasted a total of 420,000 initial claims, down from 454,000 the previous week.

We also have non-farm productivity data on tap. The quarterly report is anticipated to show a 2.1% increase following the 2.3% growth seen in Q3 2010.

The results of the latest ISM non-manufacturing PMI should give us a clue as to how Friday’s NFP will fare when it comes out at 3:00 pm GMT. The report is expected to tick higher from 57.1 to 57.2 in January. But if the details of the report reveal healthy hiring in the non-manufacturing sector, the dollar may be able to rise once again.