Daily Economic Commentary: United States

Trading Discussion News and Economy
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For the fourth straight day last Friday, the dollar found itself on the back foot as it trailed behind other major currencies. The U.S. dollar index, which measures the performance of the dollar versus a basket of currencies, stumbled to 75.35 after it had opened the Asian trading session at 76.00. Ouch!

Data from the U.S. were also disappointing. The report on personal spending printed a measly 0.4% rise, weaker than the 0.5% climb initially predicted. The pending home sales report, which was slated to show only a 0.9% decline, revealed a huge 11.6% drop instead.

The only “good” news was that the other reports came in as anticipated. The Personal Consumption Expenditure index, the Fed’s preferred report to measure inflation, came in as expected at 2.0%. Meanwhile, the pace of increase of personal income stood steady at 0.4%.

This week will probably start very slow as the U.S. goes on holiday to celebrate Memorial Day. The rest of the week will be more exciting though, as a couple of important economic reports will come out. Let’s go through them one by one.

The first one is the CB consumer confidence survey on Tuesday at 2:00 pm GMT. The market expects a reading of 66.2, a slight improvement from the previous month’s 65.4.

Then, on Wednesday, the reports to keep an eye out for are the ADP non-farm employment change at 12:15 pm GMT and the ISM manufacturing PMI at 2:00 pm GMT. The consensus is that the ADP report will show that 177,000 net jobs were added while the ISM manufacturing PMI is predicted to fall to 58.4 from 60.4.

The most important piece of data, the U.S. employment report, will arrive on Friday at 12:30 pm GMT. Last month, the report showed that a net number of 244,000 jobs were created. This month, the market only predicts a 194,000 gain as recent economic indicators have showed that growth has slowed down. The unemployment rate, on the other hand, is expected to have remained at 9.0%.

Phew! There are a lot of reports coming out of the U.S. forex calendar today, so we’ll be seeing quite a bit of volatility from the dollar. Make sure you’re there to catch ‘em pips!

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Oh how the Greenback missed the presence of U.S. traders who were off on a Memorial Day holiday yesterday! The U.S. dollar moved lazily across the charts and lost some ground against some of its major counterparts. Will it be able to bounce back today or will the dollar bears pounce?

The U.S. economic calendar is back to life today with a few medium-impact reports on deck. First, the S&P/Case-Shiller composite house price index will be released at 1:00 pm GMT. This report is expected to show that house prices in 20 metropolitan areas dipped by an annualized 3.4% in March. Next, the Chicago PMI will be released at 1:45 pm GMT. This could show that the index dipped from 67.6 to 63.8 in May, indicating that the expansion in Chicago’s manufacturing industry slowed during the month. Lastly, the CB consumer confidence reading is due at 2:00 pm GMT. The index is estimated to climb from 65.4 to 66.3 in May, suggesting that confidence improved in that period.

Bear in mind that, if the U.S. dollar moves according to fundamentals, stronger than expected figures could encourage traders to show some love for the Greenback. Weak figures, on the other hand, could cause the dollar selloff to resume.

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Greenback, where are you goin’?! Fresh off the Memorial Day weekend, the dollar was quick to get back into action but it couldn’t quite decide where to go! Though it traded higher against most of its counterparts, it weakened against the euro and the Loonie. Where will it go today?

The dollar traded on different themes yesterday. Eased concerns about Greece’s debt problems had it weakening against the euro, a threat of a credit rating downgrade for Japan had it strengthening against the yen, and hawkish remarks from the BOC had it falling against the Loonie!

Aside from that, it had to deal with a few U.S. reports, too!

The Chicago PMI printed a worse-than-expected reading of 56.6. Compared to the previous month’s reading of 67.6 and the forecasted 63.8 figure, you’d think this would be dollar bearish, but the markets didn’t seem to pay much attention to it.

We also got a look at the latest CB consumer confidence report, which was also a big downer. The index dropped from 66.0 to 60.8 in May, signaling that Americans’ spirits aren’t as high as before. Hmm… Could this have something to do with worsening labor market conditions?

Well, we’ll find out later when the ADP non-farm employment change report comes out! Considered by many as a preview of the NFP, this report is slated to show a net increase of 177,000, following the 179,000 increase last month.

Also on tap, we have the ISM manufacturing PMI. Look for this bad boy to tick down from 60.4 to 58.1. As usual, keep your eyes and ears open for any surprises!

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Blarghaaahgahgahah!!! Though the Greenback’s performance yesterday was as scattered as my brothas in The Hangover 2 when risk aversion in markets played tug-of-pips with weak U.S. fundamentals. Though USD/CHF made fresh record lows at .8383, GBP/USD also dropped by 112 pips to 1.6339. What’s up with that?

Unless you were busy skulking in a corner over the Heat’s victory in Game 1 of the NBA Finals, you should know that data released from the U.S. rocked markets and sparked a huge wave of risk aversion.

The ADP non-farm employment report, for example, showed that there were only 38,000 workers who found jobs in April. That’s peanuts compared to March’s 177,000 figure! With a dramatic drop like that, it’s no wonder many banks and agencies tripped over themselves trying to revise their forecast for this Friday’s NFP report. Remember that the employment figures are closely watched (especially in the U.S.) because it usually determines the direction of other economic indicators like retail sales and consumer confidence.

Another party pooper for the Greenback yesterday was the drop in the ISM manufacturing PMI. The data clocked in at 53.5 in April, which not only missed expectations of a 58.1 reading, but is also lower than March’s 60.4 figure. Wow, weak employment and manufacturing PMI numbers! That’s probably why market bees started buzzing about QE2.5 and QE3!

So do you think that the U.S. will continue to post more disappointing this week? The weekly initial jobless claims will be reported today at 12:30 pm GMT, together with the factory orders report at 2:00 pm GMT.

While many analysts have already dropped their forecasts on the next employment-related reports, there’s still a chance that yesterday’s ADP report is printing a worse picture than what is really going on in the U.S. market. Make sure you stick around to catch pips in case of any surprise!

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Why do the economics of USA suddenly like that? I do not understand.

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Master Shifu was right when he said, “Anything is possible with inner pips.” Despite all the bad news yesterday, the dollar only lost to the comdolls and the pound. In fact, it was still able to snatch 4 pips from the euro and end the day unchanged against the Swissy and the yen.

On the economic front, we saw that the unemployment claims report for last week was more than what the market was bracing for. The actual figure came in at 422k while the forecast was only at 416k. Factory orders also surprised to the downside when it came in at -1.2% when analysts had only predicted a 0.7% decline. Meanwhile, revised non-farm productivity for April just came in as expected at 1.8%.

As if disappointing data wasn’t bad enough, hotshot credit ratings agency Moody’s warned that it would downgrade the outlook for U.S. debt if the debt ceiling isn’t raised. Uh-oh…

Then again, it was only a warning. Heck! S&P even took a bolder move last month when it actually downwardly revised its outlook for U.S. debt from stable to negative.

Let’s see if the dollar will be able to hold its ground with the roster of economic reports we have on tap today.

You prolly already know that the much-awaited NFP report for May is due later at 12:30 pm GMT. Take note that it is expected to show that the economy generated 185,000 jobs during the month. Make sure you give Forex Gump’s blog a read to help you better anticipate the report!

Meanwhile, the unemployment rate is seen to come in 0.1% lower than it was in the previous month at 8.9%.

Then at 2:00 pm GMT, we’ll have the ISM non-manufacturing index on tap. It is seen to come in higher at 54.0 following its 52.8 reading in April.

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You almost couldn’t hear the sound of dollar bulls’ hearts breaking in all the commotion the ugly NFP report caused last Friday… ALMOST. With such disappointing labor market data, the dollar was sold off faster than you can say “Parlay!” As a result, it found itself losing to all its major counterparts save for the Loonie and Kiwi.

Rather than boosting the dollar as bad data has in the past, news that the U.S.’s non-farm payroll only grew by 54,000 last month (barely a third of the forecasted figure) weakened it like Kryptonite on Superman!

The sharp slowdown was highly unexpected, and now it seems like the Fed will have no choice but to keep its monetary policy loose in the near future… unless it wants to deal its labor market another blow!

It’s no surprise that the labor market has been lagging behind in the U.S.’s recovery. If we see another month or two of weak figures, it could mean that the labor market is on the verge of double-dipping! Ouch. Perhaps that will change the Fed’s mind about QE3?

In any case, the better-than-expected ISM non-manufacturing survey did little to ease bearishness on the dollar last Friday. From 52.8, the index upgraded its reading to 54.6 in the month of May to beat forecasts calling for a 53.8. Though most companies believe that business conditions have stabilized a bit, they still seem concerned about the volatility of commodity prices.

No data on tap today, but we do have a couple of bigwigs due to speak. FOMC member Plosser is supposed to discuss “Central Bank Policy After the Crisis” at 7:30 am GMT, while FOMC member Fisher will take the stand at 9:30 am GMT. I’d pay close attention to what these guys have to say. Who knows, they might just give a hint or two about future policy!

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It looks like the Greenback had risk aversion on its side again as the safe-havens outpaced the higher-yielding currencies yesterday. Its only loss was against its other lower-yielding rival, the Japanese yen, as USD/JPY ended 9 pips lower than its 80.25 open price.

Uncle Sam didn’t release any top-tier economic data but the markets still seem to be reeling over the weak jobs report released last week.

Today, Fed head Ben Bernanke is set to speak about the U.S. economic outlook at 7:45 pm GMT. Better hold on to your hats because we might see some wild moves from the Greenback at this time. After all, as the head of the U.S. central bank, Bernanke’s outlook could determine the future monetary policy stance of the Fed. Watch out for any downbeat remarks because this could hint at a higher possibility of QE3!

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And the dollar’s winning streak ends at one! Dollar weakness was back in vogue yesterday, which helped higher yielding currencies push higher. EUR/USD closed 117 pips higher at 1.4682, levels it hasn’t hit in just over a month. Meanwhile, USD/CAD backed off the .9800 handle, finishing 53 pips lower at .9755.

The onslaught began early in the London session, and nothing changed during the New York session when Fed Boss Ben Bernanke spoke about the outlook of the U.S. economy. As expected, Bernanke was pretty bearish and even said that the loose monetary policy was needed to boost the economy.

This wasn’t surprising, considering that Bernanke has repeatedly pointed to weakness in the labor market as reason to keep the QE flowing. And now that the labor market is hitting a soft patch, many are speculating that the Fed will be keeping current monetary policy loose, giving traders more reason to be dollar averse.

No biggies on the docket today, with only the Beige book scheduled for release at 6:00 pm GMT. The report shouldn’t reveal anything we don’t already know, which is that the U.S. economy is still struggling.

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Aaaah… There’s nothing like good ol’ risk aversion to get dollar bulls shufflin’ up the charts, eh? The dollar scored a win against all of its major counterparts yesterday save for the yen. It gained the most from the euro with 112 pips, and the Aussie with 95 pips.

The lack of economic data from the U.S. must have allowed the markets to forget about the country’s sluggish economic growth. Heck! Not even a warning from Fitch kept 'em bulls from charging for the dollar!

The credit rating agency cautioned the government that it would downgrade U.S. debt from its current AAA rate if the Congress doesn’t reach a consensus to raise the debt ceiling by August. Then again, Fitch’s announcement wasn’t anything new. We’ve already heard S&P and Moody’s lower their outlook on U.S. debt before.

The Fed’s Beige Book was the only event risk on for the dollar yesterday and it was more of a snoozer than a show-stopper.

Despite the disappointing NFP figure we saw last week, the report reflected that a lot of Fed districts still saw improvements in the labor market. However, most of them did acknowledge that growth slowed during the month.

Our forex calendar has a couple of reports listed to be released from the U.S. today.

At 12:30 am GMT, the trade balance report for April will be on tap. Traders are anticipating it to print another trade deficit, with imports outpacing exports by 48.6 billion USD. Along with that, we’ll get dibs on the initial jobless claims for last week. A modest gain to 424,000 from the previous week’s 422,000 reading is expected.

Make sure you also gauge market sentiment in yesterday’s trading, ayt? Remember that the dollar usually rallies in times of risk aversion.

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Positive data, positive dolla! Thanks to upbeat economic numbers, the dollar was able to post nice gains across the board, losing only to the higher-yielding comdolls. How will it act today?

Finally, some good news from the U.S.! Yesterday’s trade balance data was a nice change from the usual red figures the U.S. has been dealing out. According to the facts, a 1.3% surge in exports lifted the U.S.’s trade deficit from 46.8 billion USD to just 43.7 billion USD, besting the consensus forecast which called for a wider deficit of 48.6 billion USD.

On the other hand, unemployment claims data fell in line with expectations, more or less. Last week saw initial jobless claims climb from 426,000 to 427,000. Now, that ain’t exactly bullish, but I suppose markets were relieved to see that the labor market isn’t deteriorating THAT much. After all, last week’s horrific NFP data sort of set the tone for disappointing employment figures.

No tier 1 events on tap today, but you might be interested in catching FOMC member Dudley’s speech at 1:00 pm GMT. Dudley is one of the voting FOMC members that lean towards the dovish end of the spectrum, so don’t be too surprised if he makes comments about keeping stimulus in place. If that does happen, expect to see the dollar fall!

We also have the federal budget balance due at 6:00 pm GMT. Forecasts have its deficit growing from 40.5 billion USD to 148.2 billion USD. Stay on your toes because if actual results exceed expectations, dollar bulls may rally once more!

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Risk aversion was the dollar’s Steven S[I]PIP[/I]berg last Friday that directed its performance to pull-off a Super 8, first place finish in the charts. It won against all of its major counterparts, scoring triple-digit wins against higher-yielding currencies and modest gains against the Swissy and the yen.

However, some naysayers are doubtful if the dollar’s strength would continue this week. Unlike last week, our forex calendar is filled with a handful of high-caliber economic reports from the U.S. for the next five days. These market junkies are saying that economic data would bring the spotlight back to the dollar and investors would not be able to easily ignore any disappointment.

We start things off tomorrow with the retail sales and PPI reports for May. At 12:30 pm GMT, markets are expecting to see that the headline consumer spending figure would come in at -0.3% while core retail sales is anticipated to print a 0.3% uptick. The PPI figure, on the other hand, is eyed at 0.1%.

Then on Wednesday, we’ll get dibs on more inflation data with the CPI report for the same month. To be released at 12:30 pm GMT, both headline and core CPI figures are expected to print at 0.2%. The Empire State Manufacturing index will also be released along with the report. The consensus is for the index to show a pickup in manufacturing activity in New York with the forecast for June higher at 13.4 than May’s 11.9 reading.

A few minutes later, at 1:00 pm GMT, the TIC report will be released. A surplus of 45.3 billion USD is predicted, indicating that foreign demand for U.S. long-term securities increased in April, following the 24.0 billion USD reading we saw for March.

Come Thursday, we’ll get to sink our teeth into data on building permits and initial jobless claims at 12:30 pm GMT. Residential buildings that started construction in May is anticipated to amount 550,000 while the number of people who filed for unemployment benefits is seen at 421,000.

At 2:00 pm GMT, the Philly Fed Manufacturing index will be on tap. Analysts have their hopes up that manufacturing activity in Philadelphia picked up with the forecast for June almost double the 3.9 reading for May at 7.1.

We will then end the week with the preliminary University of Michigan Consumer Sentiment report for June, scheduled to be released on Friday at 1:55 pm GMT. Take note that it is anticipated at 74.4 and a better-than-expected figure could be bullish for the dollar.

Start marking your calendars kids!

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One day you’re on top of the world, the next you’re down in the dumps – that’s what happens when you’re a currency in the forex market! After its super rally across the charts last Friday, the dollar found itself giving up a lot of ground versus other major currencies yesterday. By the end of the U.S. trading session, the dollar already gave up 109 pips to the pound and 68 pips to the euro.

With most of Europe on holiday, it was quite a surprise that the dollar moved the way it did. Some traders cited hawkish comments from BOE Market Wheal as the reason behind the dollar’s fall, while others believed that it was merely a strong case of profit taking from the rally we saw last Friday.

Unlike yesterday, today’s forex calendar presents a couple of very important economic releases. At 12:30 pm GMT, we’ll be treated to the U.S. retail sales report and the producer price index (PPI).

The U.S. retail sales report is expected to show a 0.3% drop after it had gained 0.5% the previous month. The core version of the report, which excludes volatile items such as cars, is predicted to actually rise by 0.3% following the 0.6% increase last month.

The PPI, on the other hand, is anticipated to print a 0.1% gain. With risk sentiment driving the markets, better-than-expected figures could actually prove to be detrimental for the dollar!

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You know it’s summer when the bears wake up from hibernation to take over the forex forest! Once again, dollar bears reigned supreme, as a healthy dose of risk appetite spurred higher yielding currencies higher versus the dollar. EUR/USD booked a 35 pip gain to end at 1.4450, while USD/CAD break below a rising trend line to close at .9692, 76 pips lower for the day.

So what got risk appetite going? Aside from that delicious salmon dish that Huck prepared last night, it seems like the markets reacted positively to yesterday’s retail sales reports. Analysts were expecting a steep drop in retail sales, given that the labor market has been stinking up the joint like Cyclopip after a game of basketball.

Instead, the market got a pleasant surprise when headline retail sales growth came in at -0.2%, slightly better than the anticipated -0.5% decline. Yes, it was still negative, but the fact that it wasn’t too bad was good enough for the markets. For now, it seems that we’re back to the classic good-U.S.-data-sparks-risk-taking paradigm.

In other news, producer price index figures came in slightly higher than anticipated, printing an increase of 0.2%. It was expected to come in at just 0.1%. This report is a leading indicator of inflation, because any increases in the price that companies pay for raw materials is normally passed on to average Joes like you and me. Just keep in mind that a 0.2% increase ain’t much and didn’t really excite the markets at all.

Speaking of inflation, we’ve got CPI data coming out tonight at 12:30 pm GMT. Word is that consumer prices growth will fall from 0.4% in April to just 0.2% in March. This would just highlight that inflation is as ice cold as Lebron James was in the NBA Finals, and that the Fed has no reason to be raising interest rates right now.

Also at 12:30 pm GMT, the Empire State manufacturing index will be available. The index is projected to come in at 12, slightly better than last month’s 11.88 figure. This would indicate improving conditions in the New York area.

Later on at 1:00 pm GMT, the Treasury International Capital System (TICS) report will be released. The report measures the net investment in both local and foreign long-term securities and is indicative of demand for the dollar. The report is expected to show a figure of $35.0 billion, 50% more than last month’s figure of $24.0 billion. A larger than anticipated figure would indicate that demand for U.S. Treasuries is picking up.

Lastly, we’ve got capacity utilization and industrial production figures on tap at 1:15 pm GMT. Capacity utilization is projected to have picked up and should now be at 77.1%, up from 76.9% the previous month. Meanwhile, industrial production is seen to have risen 0.3% in May, a nice improvement from the flat growth we saw in April. If these reports come in better than anticipated, it could spell another day of gloom and doom for the dollar.

Phew that was a long one! With all the reports coming out tonight, we’re sure to see some volatility in the markets! Good luck my forex buddies!

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Winning may not be everything, but it certainly made the dollar bulls very happy yesterday. EUR/USD, after two straight days of wins, dropped like a rock yesterday and closed the U.S. trading session a whopping 279 pips.

According to a news report, EU officials had a difficult time breaking the deadlock on the second Greek bailout plan in an emergency meeting yesterday. This kick started risk aversion, and helped the dollar reign supreme across the board.

Data that came out from the U.S. also sang the same disappointing tune. The empire state manufacturing index printed a -7.8 reading, opposite the 11.9 figure seen the month before and the 13.0 forecast. The report on industrial production reported only a 0.1%, which was slightly lower than the 0.3% initially predicted.

The only “good” news that came out was the U.S. consumer price index (CPI). The headline CPI showed a 0.3% gain versus the 0.2% consensus while the core version of the report which excludes volatile items in its computation like food and energy came in as expected at 0.2%.

Today, at 12:30 pm GMT, we’ll be treated another set of important economic data. These reports – building permits (550K forecast), housing starts (540K forecast) unemployment claims (421K forecast), current account balance (-126 billion USD forecast), and Philadelphia Fed Manufacturing Index (7.1 forecast) – will be vital in providing direction for the Greenback. Looking at yesterday’s events, weaker-than-expected figures will probably lead to risk aversion, which is positive for the dollar.

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Winner, winner, chicken dinner! The Greenback pocketed tons of winnings yesterday as risk aversion extended its stay in the markets. On top of that, economic data from the U.S. beat expectations, fueling further demand for the U.S. dollar. How will it fare today?

If there’s one currency that was able to hit two birds with one stone yesterday, that’s the U.S. dollar. It was able to benefit from risk sentiment as well as fundamentals, resulting in another day of wins against its major counterparts.

The U.S. building permits report came in stronger than expected when it printed a 0.61M figure, higher than the projected 0.55M reading for May. Unemployment claims landed at 414,000 for the previous week, which was slightly less than the estimated 421,000 in initial jobless claims. That’s a good sign for the U.S. labor market, right? To top it all off, the U.S. current account balance showed a mere 119 billion USD deficit instead of the expected 126 billion USD shortfall.

The only disappointing figure from the U.S. yesterday was the Philly Fed manufacturing index, which plummeted from 3.9 to -7.7. Yep, that’s right, the manufacturing index landed in the red zone instead of rising to 7.1 this month. That means manufacturing conditions are worsening this June. Uh oh, now that can’t be good.

Today, only the University of Michigan consumer sentiment reading is due. The index of is expected to dip from 74.3 to 74.2 this month, suggesting that consumers’ financial confidence is slightly lower. But no worries, the previous month’s figure was already revised upwards from a 72.4 reading. Stronger than expected figures could boost the Greenback again, so make sure you keep an eye out for the release on 1:55 pm GMT.

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As my momma always used to say, things can always change on a dime! And that’s exactly what happened last Friday! A day after dominating the market, the dollar went right back to its losing ways. EUR/USD closed 7 pips above the 1.4300 handle.

Part of the dollar’s losses can be attributed to the Ben Affleck–like performance of the University of Michigan consumer sentiment index (for all you Pearl Harbor fans, that is NOT a compliment. The index came in at 71.8, slightly off the 74.2 forecast.

This indicates that consumer confidence fell a lil bit in the past month, and could mean that the U.S. economy is as cold as Val Kilmer the Iceman. This would give the Fed even less reason to hike rates and possibly even throw in some QE3 in to economy.

Speaking of the Fed… Big Ben and his buddies will be taking the spotlight later this week when the Fed makes its monthly FOMC statement.

Before we get ahead of ourselves, lets just remember that QE3 is NOT being discussed right now. Still, I expect that we won’t be hearing any hawkish comments from Bernanke this week, which might keep the dollar from pushing higher in the markets.

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Im a newbie to the forum & graduated from an exiting new school of Pips!!:, I too agree & keep a good look at those H4 charts y’all, can’t waste time on those fib levels this week…& love this blog…keep it up pip diddy

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Thanks, thejjaster!

Finish your School of Pipsology, aight? Before you know it you’ll be a consistently profitable trader. Keep reading and keep practicing :wink:

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The Greenback’s performance yesterday was as weak as the reviews for my boy Ryan Reynold’s Green Lantern when it lost across the board on a small wave of risk appetite and anti-dollar sentiment. Though USD/JPY inched 15 pips higher at 80.30, EUR/USD also climbed by 32 pips to 1.4300.

With the way the dollar reacted to the last FOMC statement, can you really blame the dollar bears for attacking? As Forex Gump pointed out on his FOMC statement blog post, the dollar fell across the board when the Fed didn’t offer anything new and just stuck to its QE2 plan.

But if the Fed was a bit neutral then, how are they going to act now that we’ve seen tons of worse-than-expected data since the Fed took center stage last month?

Aside from a bit of anti-dollar sentiment, the small wave of risk appetite might have weighed on the dollar. Since all eyes are on Greece these days, any comments and progress will have an impact on risk sentiment.

While you wait for more news on Greece and the FOMC statement tomorrow at 6:00 pm GMT, you might want to trade the U.S. existing home sales report coming out today at 2:00 pm GMT. Market geeks expect home sales to drop to 4.82 million USD in May from its 5.05 million USD figure in April, but a downside surprise could send the dollar to another trip down the charts.