Daily Economic Commentary: United States

Trading Discussion News and Economy
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Way to drop the ball! On its big day, the dollar was a big disappointment as it lost massive pips against its major counterparts in light of weaker-than-expected growth and the Jackson Hole symposium. While EUR/USD rallied 110 pips to close at 1.4496, USD/JPY tumbled to 76.69 after opening at 77.49.

The first event to deal a blow to the dollar was the release of soft GDP data. According to last quarter’s stats, the economy grew just 1.0%, just a hair’s width below the forecasted 1.1% growth. While the report did deal a bit of good news by revealing healthier corporate profits, wages, and salaries, it didn’t paint such a pretty picture for consumer sentiment.

Apparently, our bros in America haven’t been in the mood to spend, and this has taken its toll on consumer spending, which only grew at 0.4% last quarter, its slowest pace in over a year. That’s definitely not what you want to hear from the economy’s cash cow as consumer spending contributes around 70% of GDP.
This was so alarming that after seeing such figures, many economists were forced to cut their growth forecasts for the year.

But leave it to Big Ben Bernanke to look on the bright side of things. In his speech in the Jackson Hole symposium, the Fed top dog sounded surprisingly upbeat for the economy. Not only did he NOT signal more stimulus (QE3) as many had anticipated, but he even said his long-term outlook for the economy has become “more optimistic.” Furthermore, he added that the recovery will remain moderate and will probably pick up in the second half of the year. He even said that the Fed will do “all that it can to help restore high rates of growth and employment.”

Of course, right after hearing those words, the markets reacted by buying the dollar back as they unwound their QE3 bets. But as the day wore on, they eventually resold it. Now why did they do that??

One possible explanation is that it took time for the markets to realize that all that Big Ben did was delay the decision for further easing to September, when the Fed holds its next FOMC meeting. After all, Ben never really ruled out QE3, did he? Some describe his words as blind optimism, as Bernanke himself admitted that the Fed cannot guarantee long-term growth. That being the case, many believe the Fed is just buying more time to decide what to do.

Now, the question is, will this continue to drag down the dollar? Well, momentum certainly seems to be siding with dollar bears. But we must also take into consideration any upcoming reports if we want to avoid getting blindsided by news releases.

Today, we have pending home sales data due… Forecasts call for a 0.8% decline after the previous month’s 2.4% uptick. Interested in trading the news? Catch the release at 2:00 pm GMT.

Later in the week, we’ll take a look at more critical U.S. data. We have the FOMC meeting minutes due tomorrow, and the ADP employment report on Wednesday. Thursday picks up with the ISM manufacturing PMI, and on Friday, we have the NFP report on tap. These reports, when taken together, will give us a much clearer picture of the state of the U.S. economy, and in the process, give us a better idea of where we can expect the dollar to go! Good luck, folks!

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Kaboom! With risk appetite picking up to start the week, the dollar found itself sinking against higher yielding currencies. EUR/USD finally broke above the 1.4500 handle, while AUD/USD rose nearly 80 pips to close at 1.0654.

Part of the reason why the dollar have suffered could be that traders may be starting to price in additional quantitative easing measures by the Fed. Take note, head honcho Ben Bernanke stayed coy about the prospects of more QE3 at last week’s Jackson Hole Symposium. Some believe though, that decision could be made as soon as the next Fed meeting in late September and may actually be establishing their positions as early as now.

In other news, we got some mixed data from the U.S yesterday.

First, the core PCE index, which is rumoured to be the Fed’s preferred gauge of inflation, came in as expected at 0.2%. Of course this doesn’t really mean much, as it just shows that inflation remains subdued in the U.S.

We got some good news in the form of the monthly personal spending report, which showed that consumer consumption rose by 0.8% last July, which beat the forecasted growth of 0.5%. This indicates that consumers are spending more, which bodes well for the economy recovery. The only problem is that it outpaced the growth in personal income, which came in at 0.3%.

Spending is fine and dandy, but not when you spend more money than you make! That’s what gets you in trouble! Hopefully this is just a one month aberration and income growth picks up in the coming months.

Lastly, pending home sales figures were disappointing, falling a worse-than-expected 1.3%, after projections were calling for a 0.8% decline. This marked the second consecutive month that home sales have dropped, and is indicative of a poor housing market.

For today, we’ve got some top tier data in the form of the CB consumer confidence index and the FOMC meeting minutes, which are coming out at 2:00 pm and 6:00 pm GMT respectively.

The consumer confidence index is projected to print at 52.1, which would mark a drastic drop off from last month’s release of 59.5. Then again, considering all that’s going on in the global economy, it shouldn’t be that surprising that everyday Joes are becoming less optimistic.

The one report I’m looking forward to though is the FOMC meeting minutes. Today’s release will be heavily anticipated as it will give a better glimpse as to the Fed’s stance regarding more QE. If it turns out that less FOMC members are in favour of more stimulus measures, it may just give the dollar the boost it needs to bounce back from its recent defeats!

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Dollar trading was as varied as the colors of the rainbow yesterday due to the mixed results of economic data released. While the dollar posted huge gains over the euro and the pound, it fell against the Aussie and the Kiwi. The U.S. dollar index ended the day at 74.36, 24 percentage points higher from the level it opened during the Asian trading session.

On the positive side of things, the S&P/CS Composite House Price Index came in with only a 4.5% decline, slightly better than the 4.7% decrease initially expected. It was also an improvement from the previous month’s 4.6% fall.

On the negative side, the CB Consumer Confidence survey failed to meet the forecast of 52.1 and printed a 44.5 reading only. The Federal Reserve’s meeting minutes also revealed that disagreement with regards to monetary policy has grown. Some members thought that additional easing was necessary while others believed that they should remain conservative.

It seems that the future will be cloudy for now as the Fed remains divided on how they should deal with the U.S.’s very slower-than-expected growth.

Today, there are three reports that you should watch out for. The first one is the ADP’s version of the NFP. It will publish at 12:15 pm GMT later and is predicted to show that 102,000 net jobs were created. The second one, which is the Chicago PMI, will come out at 1:45 pm GMT. It is slated to print 54.3, lower than last month’s 58.8. Lastly is the Factory Orders report. It will come out at 2:00 pm GMT and is predicted to show a 1.8% rise, opposite the 0.8% from last month.

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The dollar danced to the tune of risk aversion yesterday as it gained against high-yielding currencies, but lost against its fellow safe havens on mixed economic data. EUR/USD sharply dropped by 88 pips to 1.4366, while USD/CHF plunged to an intraday low of .7995 before capping the day with a 141-pip loss at .8057.

Just when investors thought that risk appetite was creeping in – BAM! They were presented with mixed economic reports from the U.S. The Challenger job cuts report revealed less layoff plans in August, while the ADP report printed at 91,000 when analysts already pegged the figure near 50,000. These employment figures are still weak, of course, but they weren’t as bad as markets had predicted.

Chicago’s PMI data also gave currency bulls a bad moment, but only for a while because the 56.5 reading in August is actually better than the 54.3 index number that analysts were eyeing. Lastly, factory orders in July went up by 2.4%, which is not only better than June’s upwardly revised 0.4% growth, but is also better than the 0.8% growth forecast.

Will the dollar gain more ground against its high yielding counterparts today? At 12:30 pm GMT we’ll get hold of the initial jobless claims report, which will be followed by the ISM manufacturing PMI at 2:00 pm GMT. Both reports will be considered my most investors ahead of the big NFP report this Friday, so make sure you watch out for it too!

Also remember that aside from the U.S. economic reports, markets will also be watching for any signs of more QE from the FOMC members. Word around the hood is that Fed President Lockhart has been stirring up the airwaves with his comments, so stick around for more development on this, aight?

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Thanks to risk aversion rearing its ugly head back into the markets, the dollar was able to once again spook pips out of its European counterparts. EUR/USD ended the day 97 pips lower at 1.4269 while GBP/USD closed the day 49 pips below its opening price at 1.6184.

The Greenback was even able to bring snatch pips from the yen when USD/JPY closed at 76.80 after starting the day at 76.57. Impressive, huh?

As it turns out, Europe’s sovereign woes continued to highlight the dollar’s safe haven reputation. It might have also helped that yesterday’s roster of economic reports didn’t disappoint market expectations.

Last week’s unemployment claims report showed that 409,000 people filed for jobless benefits which was what analysts had predicted. On top of that, September’s ISM manufacturing PMI report came in at 50.6. The figure might have come as a pleasant surprise for dollar bulls as market junkies were bracing for a bigger pullback in overall manufacturing activity in the U.S. given the disappointing manufacturing reports we’ve seen in recent weeks.

I don’t think we’ll see a lot of dollar lovin’ today though. Well, at least not until the much-awaited NFP report is released. The employment data for August will probably rock the markets more than the previous releases because the figure would most likely affect the Fed’s stance on monetary policy. Word around the FX hood is that if the report tanks so bad, Big Ben and his buds may just pull the trigger on QE3 soon.

Due at 12:30 pm GMT, analysts have predicted the NFP report to show that a net total of 74,000 people joined the labor market in August. Meanwhile, the unemployment rate is seen to have remained steady at 9.1%.

Make sure you don’t miss it later, ayt? If you’re unsure how to trade this high-caliber report, head on to Forex Gump’s most recent blog post as he cites the possible scenarios for the NFP release. Good luck and may the pips be with you!

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The dollar’s price action last Friday showed another classic case of risk aversion in markets as traders reacted to the surprisingly weaker-than-expected U.S. NFP report. While EUR/USD fell by 74 pips to 1.4196, USD/CHF also dropped to an intraday low of 227 pips below its open price. Yikes!

Looking at the much-anticipated NFP report, I can’t really blame traders from flocking to the low-yielding currencies. The Non-Farm Payroll report not only showed ZERO job growth in August, it also revealed that average earnings of existing workers actually declined by 0.1%. Meanwhile, the unemployment rate remained at 9.1%.

The disappointing figures sent a huge wave of risk aversion in markets as investors worried about global economic growth. After all, severe employment troubles in the world’s largest economy is a hard pill to swallow especially when the euro zone and the Japanese economy, the world’s third largest economy, are also facing strong headwinds.

For today traders will have more time to digest the weak report as it is a Labor Day bank holiday in the U.S. (ironic, isn’t it?) The action will start tomorrow at 2:00 pm GMT though, when the ISM services PMI is released, followed by the Beige book report on Wednesday at 6:00 pm GMT and the trade balance report on Thursday at 12:30 pm GMT.

Though the reports above aren’t as closely watched as the NFP report, they might still rock the markets if they print dramatically lower or higher than analyst expectations. Make sure you stay glued to the tube!

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Here we go, fellas! U.S. traders are now back from their Labor Day holiday and are ready for some action. The U.S. dollar didn’t let the lack of trading volume stop it from making gains against its major counterparts yesterday, and we might just see the same behavior today. Let’s take a look at the upcoming economic reports to find out.

There weren’t any economic figures released from the U.S. yesterday but risk aversion from last week’s NFP release continued to take its toll on the higher-yielding currencies. Today, the U.S. is set to release its ISM non-manufacturing PMI which is expected to have dipped from 52.7 to 51.2 in August. Bear in mind that traders are feeling extremely wary about taking on more risk these days, which means that a worse than expected figure could trigger more safe-haven buying. Keep an eye out for the release at 2:00 pm GMT.

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What can stop the Greenback’s rally right now? Nothing, it seems. On Monday, the Greenback rose due to increased risk aversion. Yesterday, the reason was a very positive ISM-non manufacturing survey. The U.S. dollar index, which tracks the performance of the Greenback versus other major currencies, won for the sixth straight day and closed the U.S. trading session at the 76.34 level.

The ISM non-manufacturing PMI showed unexpected strength when printed a reading of 53.3 reading, significantly higher than both the forecast (51.2) and the previous month’s figure (52.7). While it didn’t completely remove double-dip recession fears, it did show that economic recovery has not stopped and is definitely still improving.

The only bad news is that the employment section of the survey fell, reaffirming the weak job growth revealed in the most recently released non-farm payrolls.

Today, the U.S. economic calendar has nothing in store for us. This doesn’t mean that we’ll be seeing a quiet trading session though. There are a number of tier 1 reports from other major economies (BOJ and BOC interest rate decision, Ivey PMI, U.K.’s manufacturing production) that will produce a lot of volatility in the foreign exchange market!

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Ahh, all good things must come to an end. The Greenback’s winning streak came to a close yesterday as risk appetite improved. The commodity currencies outpaced the U.S. dollar, which consolidated against the Swiss franc. USD/JPY closed at 77.28 while EUR/USD ended 4 pips above the 1.4100 handle.

Thanks to the German court’s ruling on the bailouts, risk appetite improved considerably yesterday, encouraging traders to pursue higher-yielding assets. Aside from that, the contents of the Fed’s Beige Book weren’t as pessimistic as expected. The Beige Book revealed that seven out of the twelve Fed districts reported a slowdown in growth while the other five showed modest growth. Not too shabby, eh?

The good news is that consumer spending showed improvements in most districts while the Fed noted that the labor market is generally steady. Now that’s not exactly what we witnessed when we saw the big fat zero on the August NFP report! But since the Beige Book is typically used as the basis for the Fed’s upcoming monetary policy decisions, the central bank probably doesn’t feel the need to implement QE3 yet.

Fed Chairman Ben Bernanke’s speech at 5:30 pm GMT today could shed more light on the Fed’s outlook. Keep your eyes and ears peeled for any dovish comments because these could hint at the prospect of QE3 and bring risk aversion back in the markets.

But before that, don’t forget to keep tabs on the U.S. economic figures set for release today. The trade balance is due 12:30 pm GMT and could show that the deficit narrowed from 53.1 billion USD to 50.6 billion USD in July. A lower than expected deficit would imply that U.S. exports are doing much better, which would be positive for the U.S. economy and probably the dollar. Also due 12:30 pm GMT today is the weekly jobless claims report which could show that first-time claimants reached 407K in the previous week.

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The dollar FTW!!! Thanks to a serious case of risk aversion and Bernanke’s dovish words, the dollar emerged as one of yesterday’s strongest currencies. It strengthened against almost all its major counterparts, most notably against the euro. EUR/USD fell 114 pips from its opening price of 1.4104.

All eyes and ears were focused on what Fed Chairman Ben Bernanke had to say yesterday. Leave it to Big Ben to deliver! He gave the markets just what they were hoping for - plenty of action!

According to Ben, the Fed is ready to take on more stimulus in the near future, inflation notwithstanding. However, he stopped short of revealing what course of action the Fed is most likely to take. Whether it’ll implement a full-blown QE3 or try out other options such as Operation Twist is yet to be determined.

All in all, this helped trigger a bout of risk aversion that saw U.S. stocks tumble and the dollar reprise its role as a safe-haven currency.

As for economic data, the U.S. got mixed results. It’s trade balance revealed that its deficit shrank from 51.6 billion USD to 44.8 billion USD, instead of just 50.6 billion USD. Apparently, while imports rose the most since February 2008, exports bridged the trade gap by shipping more automobiles and capital goods overseas in July. Cool beans!

But on the downside, unemployment benefits rose from 412,000 to 414,000 last week. When compared to the consensus forecast of 407,000, this figure looks even worse. Clearly, the U.S. is still facing employment problems.

No more reports on tap from the U.S. today! In the meantime, check out the tier 1 reports that other countries are rolling out. Also, the elite G7 countries are set to meet today. Y’all know anything can happen when those big boys come together! For any other major events, I suggest you check out the BabyPips.com economic calendar!

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The dollar is king! Just like its fellow safe-haven currencies, the Greenback clobbered its high-yielding counterparts last Friday on a strong wave of risk aversion. EUR/USD fell by a whopping 228 pips to 1.3663 while Cable also slid by 89 pips.

Only the positive wholesale inventories data was released from the U.S. last Friday, but investors were too busy concentrating on the euro zone debt crisis to pay attention. As Forex Gump pointed out in his article, the euro received a combo of bearish news reports, which inspired a broad-based selling of high-yielding assets. Of course, it might have also helped the Greenback that investors were still feeling the good vibes from Obama’s jobs plan.

The U.S. has no economic report on tap today, so you might want to pay attention to any news report that might affect risk appetite.

Good thing you don’t have to wait long for news trading action! The U.S. will go back to printing economic reports starting tomorrow when the IBD/TIPP economic optimism is released at 2:00 pm GMT, followed by the Fed’s budget balance report at 6:00 pm GMT.

On Wednesday we’ll get hold of the retail sales and PPI numbers, which will be released at the same time when Treasury Secretary Tim Geithner is starting his scheduled speech, at around 12:30 pm GMT. On Thursday we’ll also see the initial jobless claims and CPI report at 12:30 pm GMT, which will be followed by the Philly Fed manufacturing data at 2:00pm GMT.

Last on the deck for this week is the TIC long-term purchases data on Friday at 1:00 pm GMT, and the preliminary University of Michigan consumer sentiment report at 1:55 pm GMT. Of course, you also have to keep a close eye on any hints at more QE from the Fed, as well as the risk appetite in the European markets.

Remember to focus on your trades this week, kids!

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Time for a break from all the bullishness! After rallying strongly the past few days, the dollar gave back some of its recent gains, sliding slightly against most of its major counterparts. While EUR/USD rose 56 pips to 1.3659, GBP/USD finished 13 pips higher at 1.5858. Will the dollar continue its bull run today?

Though risk aversion and European debt issues remained dominant market themes yesterday, the dollar weakened as a bit of profit-taking took place. After all, it had been rising up the charts like there was no tomorrow… a rally pause was practically expected!

The big question is whether risk aversion will set in once more and if the dollar will continue to rally. Perhaps today’s reports will give us a better idea, eh?

At 2:00 pm GMT, the IBD/TIPP economic optimism report will be due. The dollar may receive a minor boost should results surpass the previous reading of 35.8.

Then at 6:00 pm GMT, the Fed is scheduled to release its budget balance. Expect to see its deficit narrow from 129.4 billion USD to 126.5 billion USD.

But keep in mind that these reports will probably take a backseat to risk sentiment, so be sure to stay alert!

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Dollar trading was as mixed as bag of M&Ms, as it was simply all over the place. The Greenback gained versus the Australian dollar and pound, but stumbled against the euro, yen, and Canadian dollar. Will we see more of the same today?

Not only did we get mixed results on the charts, but we also got mixed results in economic releases.

First, as Vincent Chase always chooses, the good news. The IBD/ TIPP economic optimism report showed some nice improvements, coming in at 39.9. This was a solid 4.1 point improvement over last month’s release, which indicates that some consumers are becoming slightly more optimistic about the economic outlook.

The bad news though, is that the Federal budget deficit widened from 128.4 billion USD to 134.2 billion USD. It was actually expected that the deficit would shrink to 128.4 billion USD. In any case, this marks the second straight month that the budget grew, so this is something we should keep an eye on going forward.

We could be in for some wild moves today, as retail sales data and the PPI report are scheduled for release at 12:30 pm GMT. Word on the street is that retail sales grew by just 0.2% last month, down from the 0.5% uptick we saw in July. Meanwhile, the PPI report is expected to show that inflationary pressures remain subdued, as companies are expected to have paid 0.1% less for their raw materials and goods.

If these reports come in weaker than expected, it may spark another round of risk aversion, which may cause traders to run back to the safe havens!

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The Greenback’s performance yesterday was as mixed as a bag of nuts as it gained against the comdolls, euro, and pound but lost ground to the Swissy and yen. With the U.S. dollar outpacing the higher-yielders and lagging behind its fellow safe-havens, it’s pretty clear that we have risk aversion dominating the markets. Will we see more of this market sentiment today?

Risk aversion propped up the U.S. dollar in yesterday’s trading after credit rating agency Moody’s announced downgrades on two French banks. The credit rating downgrade was based on the banks’ heavy exposure to Greek and Italian debt, leading to murmurs that a euro zone debt contagion could be in the works.

Meanwhile, economic data in the U.S. came in below expectations, with headline retail sales stagnating in August. The core version of the report printed a mere 0.1% uptick, less than the projected 0.2% increase, while the July figure was revised down to 0.3%. These poor consumer spending figures were most likely a result of the weak jobs growth in the U.S. and lack of consumer confidence amidst the ongoing debt woes in both the euro zone and the U.S.

On a lighter note, the headline PPI for August came in slightly better than expected, printing a flat figure instead of the estimated 0.1% decline. However, core PPI missed the mark as it showed a 0.1% rise instead of the expected 0.2% increase. These bleak PPI figures suggest that inflationary pressures in the U.S. are starting to cool down, most likely a result of slowing demand all over the globe.

Today, the U.S. is set to release a bunch of economic data which could have a significant impact on price action again. The CPI figure is set for release at 12:30 pm GMT and both headline and core reports are expected to land at 0.2%. The actual figures are likely to come in close to consensus, considering how the PPI figures didn’t fall far from expectations.

Along with that, the U.S. will also report its weekly jobless claims, which could print a 410K figure for last week. This would be slightly less than the 414K reading seen the other week, but a higher than expected figure would mean bad news for the U.S. jobs market. Also, the current account balance due 12:30 pm GMT could reveal that the deficit widened from 119 billion USD to 122 billion USD during the second quarter of this year. The Empire State manufacturing index also due 12:30 pm GMT could print an improvement from -7.7 to -3.9 for September.

Don’t forget to stay tuned to Fed head Bernanke’s speech at 12:45 pm GMT today since he could address the prevailing weaknesses in the U.S. economy. Does he expect Obama’s jobs act to have a lasting effect on the U.S. labor market? Is the downturn in consumer spending merely temporary? These are just some of the questions he could answer during his testimony so y’all better pay attention!

Last but not least, we have the Philly Fed index due 2:00 pm GMT. Recall that the last time the Philly Fed index was released, we saw a strong case of risk aversion as the reading unexpectedly fell to -30.2 - its lowest level in ages! This time around, the index is projected to rebound to -14.7 but another unprecedented drop could force traders to flee to the safe-havens again. Stay on your toes!

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And just like that, the dollar is back eating lunch at the losers’ table! Thanks to a surge in risk appetite and mixed economic data, the Greenback traded lower versus its major counterparts. Can the dollar make a comeback today or will we see another round of losses?

The markets got a nice shot in the arm when news hit the airwaves that the ECB, in a coordinated effort with the Fed, BOJ, BOE, and SNB, would step up its efforts to provide U.S. dollar loans to European banks, as some were having difficulties obtaining scrillas to help with their operations. The ECB will now be offering loans with 3-month maturities to help provide more liquidity to these banks until the end of the year.

Coupling this with the united stance that Germany and France are presenting in light of the Greek crisis, it’s no wonder that market sentiment picked up yesterday, boosting higher yielding currencies and leaving the dollar to sulk in the corner.

On the home front however, economic data wasn’t nearly as encouraging.

Unemployment claims printed at 428,000, which was much higher than the projected 410,000 figure. This was another downer for the labor market, which has been showing weakness as of late.

The Empire State and Philly Fed Manufacturing Indexes also failed to impress, as the two reports printed scores of -8.8 and -17.5 respectively. This was slightly worse than what was expected, and indicates worsening conditions in the New York and Philadelphia areas.

It wasn’t all bad news though, as industrial production ticked up by 0.2% last month (slightly higher than the projected 0.1%), while the current account deficit shrank slightly last quarter from 120 billion to 118 billion.

The big news that caught my eye though were the monthly and yearly CPI figures. Consumer prices rose by 0.4% last month, which was double the anticipated 0.2% increase. On a yearly basis, CPI growth was at 3.8%, while core CPI is now at 2.0%, which is right smack at the Fed’s inflation target of 2.0%.

The problem is that many were expecting the Fed to introduce a fresh round of quantitative easing measures either later this month or in early November. But with prices on the rise, any additional stimulus measures could lead to a run of hyperinflation, which is something nobody wants. It’ll be interesting to see whether the recent inflation data will keep Bernanke and his boys from announcing QE3 any time soon.

For today, we’ve got TIC long term purchases data and the preliminary University of Michigan consumer sentiment report coming in at 1:00 pm and 1:55 pm GMT respectively.

The TIC report, which measures the difference of long term assets purchased by U.S. citizens and foreigners, is projected to show a net figure of 27.3 billion USD for the month of July. This would indicate that demand for U.S. assets was still high, even with U.S. debt ceiling problems and the credit downgrade.

Meanwhile, the consumer sentiment report is expected to show a slight improvement from last month’s reading of 55.7 to 56.4. Take note that other measures of consumer confidence have been falling as well, so don’t be surprised if we see today’s report actually come in worse-than-projected.

Phew that was a long one! Anyway, good luck trading today my forex friends!

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The dollar’s scorecard for Friday’s trading was as mixed as reviews for the Breaking Dawn trailer. Although it lost against the comdolls, it was able to bring sexy back against the rest of its counterparts. EUR/USD was down 91 pips from its opening price at 1.3795, USD/JPY was up 20 pips at 76.84, and GBP/USD closed just a pip shy of its opening price at 1.5798.

But looking at the mixed roster of economic reports that were released, I guess the dollar’s performance on Friday isn’t so surprising.

The TIC report for July showed that foreign investment in long-term U.S. securities only outpaced domestic demand by 9.5 billion USD and disappointed the consensus which was for a 31.3 billion USD surplus.

On the brighter side of things, the preliminary University of Michigan Consumer Sentiment index for September topped expectations when it printed at 57.8 while analysts had only eyed it at 57.3. To make the report even better, the figure for August was upwardly revised from 54.9 to 55.7.

I wonder how the dollar would fare on the charts today given that we only have the NAHB housing market index on the docket. Due at 2:00 pm GMT, the report is seen to print at 15.0. Watch out for a figure better than the forecast as it would probably spark a dollar rally.

Also, keep in mind that the Fed is scheduled to release their statement on monetary policy later this week. Some market junkies are expecting Big Ben to talk about the bank’s willingness to provide the economy with more stimulus. However, there are those who think that the most recent CPI report would keep Bernanke from being too excited about QE3. So make sure you keep an ear out for the rumors going around the FX hood!

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No mixed results this time… The dollar was straight up ballin’ yesterday! With risk aversion backing its climb, it gained ground against almost all of its major counterparts. Will it emerge on top again today?

The dollar began the week with a strong start as most major pairs gapped in favor of the USD. I suppose it has Greece to thank for its strong rally. As the day wore on, investors grew more concerned about the state of affairs in Greece, stoking demand for the safe haven currency.

As for yesterday’s lone economic report… well, the markets played little mind to it! The NAHB housing market index declined from 15 to 14 in September, showing no improvement in builder confidence.

I hope you’re all hungry for reports today because we’ve got something juicy on the menu. At 12:30 pm GMT, housing starts and building permits data will be available. Forecasts have housing starts slipping from at 0.60 million to 0.59 million, while building permits are expected to stay at 0.60 million.

Though these reports may incite further dollar bullishness with better-than-expected results, don’t lose sight of risk sentiment! If risk aversion remains in play, the dollar may continue to gain no matter what results these reports print.

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After reaching a high of 1.3593 against the euro, the dollar pared its gains and EUR/USD ended the day just 18 pips below its opening price at 1.3671. Against the yen, the dollar gave up 8 pips as USD/JPY closed at 76.45 yesterday. Uh oh, is the dollar rally losing steam already?

Maybe. It seems to me that traders already started to brace themselves for the much-anticipated FOMC statement. Fed officials already started their discussion on monetary policy yesterday and we’ll hear about what steps Big Ben and his buddies have come up with to boost the economy.

Make sure you give Forex Gump’s article a read to better anticipate the Fed’s statement at 6:15 pm GMT, ayt?

Don’t fret if you think the FOMC statement is too risky to trade. We’ll also get to sink our teeth into the existing home sales report for August which is due earlier at 2:00 pm GMT. Keep in mind that analysts have predicted the report to print at 4.76 million USD. Perhaps a better-than-expected figure would spark a mini-dollar rally which could reel you in some pips for a scalp trade. Good luck!

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Can you say Greenback domination? As expected, the Fed announced in its interest rate decision statement yesterday that they would keep rates as is and go ahead with Operation Twist, the plan to sell the Treasuries that it holds and use the money it gets to purchase ones with longer maturities. The result of the Fed’s move was huge Greenback rally across the board, with the dollar index ending the U.S. trading session a solid 59 percentage points higher from where it was during the Asian session.

The purpose of Operation Twist is simple. Operation Twist’s intention is to bring down the long-term interest rates, spur borrowing, and hopefully stimulate the U.S.’s very weak growth. The Fed’s action led to risk aversion, as market participants grew worried about the state of the U.S. economy.

In other news, the unnoticed existing home sales came out better than expected. It showed that sales rose to an annualized rate of 5.03 million, higher than both forecast and last month’s figure.

Today, the only red flag on the U.S. economic calendar is the initial jobless claims report. The market expects the report to print a 419,000 figure, which is slightly lower than the number we saw the previous month. If the report disappoints, we could see risk aversion strengthen further and result in another dollar rally.

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Looks like “Operation Twist: On” means “Risk: Off” for markets! With the FOMC statement disappointing expectations, investors flocked the low-yielding currencies like the Greenback. USD/JPY might have slipped back by 38 pips, but EUR/USD plummeted by 119 pips and Cable also retreated by 160 pips. Hoo-ah!

Based on the only-slightly-better-than-expected jobless claims report from the U.S. yesterday, it seems that the Greenback’s strength came mostly from risk aversion flows. As I have explained in my AUD update, market players were expecting a bit more aggressiveness from the Fed than just Operation Twist and recognition of weakening global economic growth. The lack of upside surprise from the Fed signaled that the central bank is running out of options to keep the economy afloat, which sparked a round of risk aversion in markets.

No reports are scheduled in the U.S. today, but traders will most likely keep an eye out for the G20 meetings, euro zone debt crisis talk, and other news that might affect risk sentiment.

Good luck in your trades today, kids!