Daily Economic Commentary: United States

Trading Discussion News and Economy
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BAM! Thanks to surprisingly weak economic data and unwinding of short positions, the dollar once again took a backseat against its major counterparts. EUR/USD rose to 1.2572, while USD/CHF also took a nasty 51-pip fall. What gives?

If you’re wondering why the dollar fell against most of its counterparts, look no further than the economic reports released from the U.S. We saw retail sales drop for the second month in a row with the headline figure down by 0.2% while the core figure also slipping by 0.4%. With the surprisingly weak NFP report that we saw a couple of weeks ago, were you really surprised that spending was also a dud?

Traders probably wouldn’t have reacted as strongly to the weak data if only the producer price index data didn’t also disappoint expectations. The PPI report showed a 1.0% decline in May, which is not only weaker than April’s 0.2% decline, but is also behind the -0.6% expectations. Good thing that the core PPI and business inventory numbers showed no changes from their previous readings, which helped limit the Greenback’s losses.

Apparently, traders put the weak NFP, retail sales, and PPI together and concluded that the Fed will most likely pull the trigger on QE3 next week. After all, Bernanke had mentioned in his last speech that the central bank is willing to act in case economic reports deteriorate. Guess what? They kinda have.

Don’t count your eggs before they hatch though, as traders will most likely wait for the CPI, initial jobless claims, and the U.S. current account reports coming up at 12:30 pm GMT. If inflation in the U.S. turns out softer than what investors are expecting, then we might see more QE3 speculations as there will be fewer obstacles for the Fed to implement QE3.

Don’t even think of missing these reports!

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And the Biggest Loser is… The Greenback! Weak economic data from the U.S. triggered another sharp dollar selloff yesterday as traders priced in the increased odds of QE3. Will the Greenback have a chance to redeem itself today?

U.S. inflation data came in weaker than expected yesterday as the headline CPI posted a 0.3% drop in price levels, larger than the estimated 0.2% decline. The core figure, on the other hand, came in line with consensus of a 0.2% uptick but still reflected a slowdown in inflation. With that, the Fed could have more room to implement further easing, especially since other economic data show that the U.S. could definitely use some stimulus.

Weekly jobless claims also came in worse than expected, with the reading chalking up a 386K rise in first-time claimants. This was higher than the previous week’s 380K reading and the consensus of 377K, showing that the jobs situation isn’t exactly improving in the country.

Their current account balance also came in the red as it printed a 137 billion USD deficit, wider than the estimated 132 billion USD shortfall and the previous month’s 119 billion USD current account deficit. This first quarter reading was the largest deficit in three years.

Today, the U.S. is set to print its Empire State manufacturing index and its University of Michigan consumer sentiment reading. The manufacturing index is slated to show a drop from 17.1 to 13.6 for June while the consumer sentiment report is expected to fall from 79.3 to 77.5, both of which reflecting a downturn in economic performance. Another round of weaker than expected figures could be the nail in the coffin for the Greenback as this would increase the likelihood of QE3 from the Fed next week, so stay tuned for these reports!

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That’s gotta hurt! The Greenback suffered a triple roundhouse kick against its counterparts last Friday as traders reacted to weak economic data. USD/JPY plummeted by 68 pips, while Cable shot up by 142 pips. Thing is, the U.S. data wasn’t the only wet blanket for the dollar bulls.

Data from the U.S. only fueled the bears’ party last Friday as they supported arguments for more of the Fed’s QE. The Empire State manufacturing index came in at 2.3 in June, the slowest pace in seven months. The TIC long-term purchases also disappointed expectations of 45.3 billion USD by clocking in at at 25.6 billion USD.

And don’t get me started on industrial production report which came in at -0.1% after showing a 1.0% growth in April! Meanwhile, capacity utilization also missed estimates of 79.2% by printing at just 79.0%. Last but definitely not the least, the preliminary reading of the University of Michigan consumer sentiment came in at 74.1 in June, which is not only a huge drop from 79.3, but also marks the six-month low for the data.

As if QE speculations aren’t enough, it also hurt the scrilla that traders were paring their short positions on high-yielding currencies ahead of the “Greekend” elections!

Will the Greenback recover some its losses today? Only the NAHB housing market index at 2:00 pm GMT is scheduled for release today, but make sure you got an eye out for the big G20 meeting starting today! Who knows, maybe we’ll hear more about additional easing from the world leaders!

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The Greenback’s performance was as mixed as the reviews for the movie Rock of Ages as the lack of top-tier economic events left the major currencies in disarray. The U.S. dollar was able to end the day higher against the European currencies but it lost a bit of ground to the comdolls. Will it find a clearer direction today?

It seems that the euphoria over the recently concluded Greek elections fizzled quickly as the safe-haven Greenback jumped to the top of the charts against most currencies yesterday. On top of that, news about the spike in Spanish bond yields sent traders scurrying back to the safe-havens.

Today, the U.S. is set to release its building permits and housing starts data for May. Building permits are projected to climb from 0.72 million to 0.73 million while housing starts are estimated to stay at 0.72 million during the month. Weaker than expected U.S. data could dampen demand for the Greenback if fundamentals prevail again, especially since the much-awaited FOMC statement is coming up this week. Better stay tuned for the housing data release at 12:30 pm GMT!

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The safe haven Greenback fell against most major currencies yesterday as the rising equities and commodity prices stoked risk appetite. The U.S. Dollar Index closed the day at 81.88, 0.55 points lower from its opening level during the Asian trading session.

As the fears of an imminent “Grexit” subside, and with the G20 suggesting that they would support struggling nations, it seems that demand for the Greenback has greatly declined.

The better-than-expected result on the building permits report also boosted the Greenback. It came in at 780,000 versus the 730,000 forecast. The housing starts report, however, failed to meet forecast. It printed a 710,000 figure, which was slightly lower than the 720,000 consensus.

Today is a significant day for the Greenback as the Federal Reserve is scheduled to announce its decision on interest rates. Most market participants expect no change on the benchmark interest rate, but believe that the central bank will implement some sort of easing. Forex Gump delves more into this issue in one of his recent blog posts. Check it out!

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Extra, extra! Read all about it! The Fed does the Twist again! Instead of implementing QE3 as many expected, the FOMC simply decided to extend Operation Twist until the end of 2012. It seems like the Greenback didn’t know how to take this news as it was all over the place after the announcement. Will it find a clearer direction today?

During their recent monetary policy statement, the FOMC kept interest rates on hold and decided against implementing aggressive easing measures. Many were disappointed to find out that the Fed only opted to extend its ongoing Operation Twist program since recent economic figures seemed to show that the U.S. economy was in dire need of stimulus.

The Fed also lowered their economic forecasts and maintained that they were ready to provide support for the economy if necessary. They now expect GDP growth to be around 1.9% to 2.4%, lower than the previous estimates between 2.4% to 2.9%.

The U.S. still has a bunch of red flags on today’s schedule so the Greenback could be in for yet another exciting day. First up, we have the initial jobless claims report due 12:30 pm GMT. This could show that first-time claimants are down from 386K the other week to 381K last week. Later on, at 2:00 pm GMT, the U.S. will release its existing home sales figure and the Philly Fed index. Existing home sales are expecting a slight dip in May while the Philly Fed index could improve from -5.8 to 0.7.

Now that the Fed has already put QE3 out of the picture for now, the U.S. dollar might be able to rely on risk sentiment as its major driving factor again. In that case, stronger than expected figures from the U.S. could spur risk appetite and send the safe-haven U.S. dollar lower. On the other hand, worse than expected reports could boost demand for the Greenback. Be mindful though that the U.S. dollar might still be sensitive to fundamentals, so this could get really tricky!

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The dollar bulls returned in full force yesterday as a chockfull of weak data from the U.S. and other parts of the world hurt risk sentiment. The U.S. dollar index which tracks the performance of the Greenback versus a basket of currencies rose to end the U.S. trading session at 82.81, 0.84 points from its opening level that day.

The weekly unemployment claims fell slightly to 387,000 versus last week’s 389,000. It was also worse than the 381,000 figure the market had initially expected.

Meanwhile, the existing home sales report, which measures the annualized number of pre-owned residential buildings that were sold the previous month, came in at 4.55 million, 300,000 lower than forecast.

And finally, the Philly Fed Manufacturing index contracted sharply as it showed a reading of -16.6. It was almost 16 points lower than forecast and it is the lowest reading since September 2011.

No major news report due to come out today, but with stocks and commodities in the red, the dollar’s recent strengthening trend appears to again be gaining momentum.

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Break time! Last Friday’s lack of major data in the U.S. inspired the dollar bulls to take a breather from their push last Thursday. The Greenback capped the day unchanged against its major counterparts with EUR/USD closing only 15 pips higher than its open price.

All eyes were on the euro zone last Friday as Germany’s Angela Merkel had a closed door meeting with Spain’s Mariano Rajoy, Italy’s Mario Monti, and France’s Francois Hollande.

Let’s see if the economic data scheduled from the U.S. will get back the investors’ attention. For starters, we’ll see the new home sales data at 2:00 pm GMT followed by the S&P home price index tomorrow at 1:00 pm GMT and the CB consumer confidence and Richmond manufacturing index at 2:00 pm GMT.

On Wednesday at 12:30 pm GMT we’ll get hold of the durable goods orders data, which will be followed by the pending home sales report at 2:00 pm GMT. Lastly, the final quarterly GDP numbers will be printed with the initial jobless claims on Thursday at 12:30 pm GMT, while the Chicago PMI and the PCE reports will be released on Friday.

Phew! That’s a lot of potential market movers! Just remember to have a trading plan ready if you’re trading any of these, aight?

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We got mixed results from the dollar yesterday as it strengthened against the euro, Swissy, and the comdolls, but weakened against the yen and the pound. What can we expect from it today?

It seems there was a tinge of risk aversion in the markets yesterday as the dollar managed to post gains against most of its counterparts. Investors are losing hope that the two-day summit of European leaders (scheduled later in the week) will yield anything productive. Oh ye of little faith!
On a more positive note, the U.S. got a bit of good news on the domestic front, as the new home salesreport for May printed above forecasts. The annualized number of new single-family homes rose from 343,000 to 369,000 last month, rather than to 347,000 as many had expected.

Up ahead, we have the CB consumer confidence report coming out at 2:00 pm GMT. According to forecasts, we’ll likely see the index drop from 64.9 to 63.8. Though this report has the potential to move the markets, risk sentiment will probably still be key to trading the dollar today. Remember, in times of risk aversion, the dollar is king!

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Mixed day for the scrilla, as it took some decent hits against the pound, the Australian dollar, and the yen but came away with small victories against the euro and the Swiss franc. Will we see more of the same today or are we in for more definitive trading?

One reason the dollar may have slumped yesterday as the Conference Board consumer confidence index came in worse-than-expected and printed at 62.0. Expectations were that the index would come in at 63.8. Take note that this marks the lowest reading in five months and indicates that Average Joes across the country are losing confidence in the state of the economy.

Meanwhile, the Case-Schiller HPI showed that the housing market is still down in the dumps, as home prices have dropped 1.9% year-on-year. Housing prices have been in a steady decline for 18 months now, and it doesn’t seem to be getting much better.

For today, we’ve got two top-tier reports being released that could prove to be major market movers during the New York session.

First, we’ve got durable goods orders heading our way at 12:30 pm GMT. Expectations are that core orders rose by 0.9% last month, while headline orders increased by 0.5%.

Then later on at 2:00 pm GMT, pending home sales data will be released. Word on the street is that the annualized pace of sales rose by 1.2% last month, which would be a massive improvement from the 5.5% decline we saw the month before.

If both these reports come in better-than-expected, it could boost risk appetite which could lead to some risk-taking in the markets. But of course, you never know how the markets will react, so make sure you practice good risk management techniques homies!

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The Greenback’s performance was as mixed as a bag of nuts yesterday as it outpaced the European currencies and the Loonie but lost ground to the Aussie and the Kiwi. Will the U.S. dollar find a clearer direction today?

It seems that the Greenback is moving to the tune of fundamentals again as better than expected U.S. economic figures boosted the Greenback against most of its counterparts yesterday. Although the core version of the durable goods orders report missed expectations, the headline figure came in much better than expected as it showed a 1.1% jump. This was more than double the estimated 0.5% uptick, and a considerable improvement over the 0.2% decline seen last April.

But the good news doesn’t end there! U.S. pending home sales also beat expectations as it showed a 5.9% increase in May, nearly five times as much as the predicted 1.2% rise. This was a nice rebound over the 5.5% decline seen during the previous month.

The U.S. is set to release its weekly jobless claims data at 12:30 pm GMT today and report 385K in first-time unemployment claimants for the previous week. The final GDP reading for the first quarter is also due 12:30 pm GMT today and no revisions from the 1.9% estimate are expected. Bear in mind that the Greenback seems to be reacting to fundamental data these days, which means that stronger than expected reports could provide support for the currency.

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When risk appetite is away, you know the dollar bulls will play! Thanks to risk aversion in markets and the lack of downside surprises in the U.S. data, the Greenback was able to sneak in gains against its counterparts. Will today’s economic reports change the investors’ minds?

Yesterday the U.S. followed up its favorablepending home sales and headline durable goods orders data with a slightly lower figure for the initial jobless claims. Not only that, the U.S. GDP was also confirmed at 1.9%. That’s not half bad compared to other major economies, don’t you think?

The Greenback bulls also got their motivation from risk aversion in markets yesterday. Thanks to euro zone officials dampening expectations for this weekend’s EU Summit, investors wasted no time selling the high-yielding currencies in favor of the Greenback.

Will today’s economic reports change their minds? At 12:30 pm GMT we’ll see the PCE price index along with the personal spending and consumption data. The PCE data is usually closely watched by the Fed, but since the FOMC peeps weren’t worried about it in their last meeting minutes, we’ll just have to watch for any significant surprises!

Around 1:45 to 1:55 pm GMT we’ll also get hold of the Chicago PMI and the revised UoM consumer sentiment report. Both reports are expected to come in at a slightly higher figure this month.

Best of luck in your trades today, homies!

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Just like Katie Holmes, we saw the dollar divorce itself from the bulls last Friday as risk appetite soared following the announcements made in the EU Summit.

EUR/USD closed 208 pips above its opening price at 1.2655 while GBP/USD ended the day 146 pips higher at 1.5660. However, the dollar did manage to snag a win against the yen as USD/JPY closed with a 41-pip gain at 79.87.

Much to everyone’s surprise, European leaders agreed to use the ESM to recapitalize banks. The outlook going into the meeting had been very bleak. And so, news about EZ leaders taking concrete steps to address the debt crisis allowed investors to breathe a sigh of relief and seek higher-yielding assets. (You can find out more about the EU Summit in my EUR commentary.)

Of course, it also didn’t help the dollar that U.S. data released on Friday failed to impress markets. The core PCE index for May, said to be the Fed’s preferred measure of inflation, came in at 0.1% versus the 0.2% consensus. We also saw that both personal spending and income disappoint expectations. Analysts were eyeing a modest 0.1% uptick in spending for May but the actual figure came in flat. Meanwhile, personal income only grew by 0.2% and fell short of the market’s 0.3% forecast.

The University of Michigan consumer sentiment index for June was also revised down to 73.2 after being previously reported at 74.1.

Only the Chicago PMI came in better than expected at 52.9 versus the 52.8 consensus. But because the actual figure wasn’t that much different from the forecast, the report didn’t really give the dollar a significant boost.

Perhaps the ISM manufacturing PMI, which is due later at 2:00 pm GMT, can provide the dollar with some support on the charts. The consensus is for the figure to come in at 52.1 but if the actual reading comes in better than expected, we could see the dollar rally. So watch out!

Aside from that, be sure to keep tabs on market sentiment. If investors still feel giddy from what happened during the EU Summit, chances are that the dollar’s gains could be limited in today’s trading.

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With the markets still nursing a hangover from the weekend EU summit, the dollar had a hard time making headway against its major counterparts. Even with a slight bout of risk aversion egging it on, it was unimpressive on the charts as it only managed to post significant gains against the euro.

Surprisingly enough, it actually looked as though the dollar would strengthen after seeing the ISM manufacturing PMI. The index dropped from 53.5 to 49.7 in June, disappointing investors who had sought a reading of 52.1.

Let me put this into perspective for all of y’all. This is the first time in three years that the index fell below the 50.0 critical level, homies! Led by a crash in new orders, the unexpected contraction stoked concern about the U.S. economy, causing markets to react by selling off risk assets.

As a result, the dollar was able to post some decent gains after the report, but unfortunately, the rally wasn’t sustained. Maybe the looming prospect of QE3 had something to do with that, eh?

Today, we only have factory orders data on tap, and it’s set to print an increase 0f 0.1% after the previous month’s 0.6% decline. Though this report normally doesn’t have a big impact on the markets, it could end up causing a bit of volatility if it prints a huge surprise, just as yesterday’s manufacturing PMI did.

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Despite yesterday’s positive data, the dollar’s price action was as mixed as my Uncle Joe’s famous barbecue sauce on the charts. It scored a 30-pip win against the pound and a 29-pip win against the yen but it gave up 21 pips to the euro and 15 pips to the Swiss franc.

Factory orders for May rose by 0.7% and completely erased the decline incurred in April. The figure also topped expectations which was for a modest increase of 0.1%.

Some analysts say that the Greenback’s scorecard reflects the market’s excitement for the 4th of July festivities. A handful of market junkies might have decided to close their open positions ahead of the U.S. holiday while others might have already set their orders for the much-anticipated NFP report on Friday.

So if you’re trading, keep in mind that today is a holiday in the U.S. and we could see lower volume in the market. Happy 4th of July, y’all!

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The Greenback was able to smash both the pound and the euro to bits yesterday as investors priced in their bearish expectations on the upcoming central bank interest rate statements. EUR/USD closed the day with a 71-pip loss while GBP/USD suffered a 94-pip defeat.

Apparently, most market participants predict some form of easing from both the European Central Bank (ECB) and the Bank of England (BOE). If you want to know more about the upcoming interest rate statements, just head on over to Forex Gump’s blog. In his latest post, he discusses the market’s forecasts and how they could possibly affect the euro and the pound’s price action.

There are a couple of market-moving events scheduled to happen in the U.S. as well. At 12:15 pm GMT, ADP’s version of the non-farm employment will be released. Since the ADP provides payroll services to many companies in the U.S., the results could give us an idea of how tomorrow’s employment report will come out.

Shortly after, at 12:30 pm GMT, the weekly unemployment claims will be published. It is slated to show that 385,000 people claimed for jobless insurance, which is slightly lower than the previous week’s 386,000.

The last important report due today is the ISM non-manufacturing PMI. It is anticipated to print a reading of 53.1, down from last month’s 53.7.

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Looks like the fireworks came one day later! Thanks to the releases of a slew of reports yesterday, the dollar exploded higher, posting massive gains versus the euro and pound. EUR/USD dropped 147 pips before finishing at 1.2389, while GBP/USD closed 72 pips lower at 1.5524.

Thanks to a rate cut by the ECB and the BOE expanding its asset purchase program, the dollar zoomed higher yesterday. One reason why we saw such strong moves was that U.S. traders were just rolling back into the office after the Fourth of July holiday. They had yet to position themselves ahead of the central bank decisions and once they heard that what the ECB and BOE had to say, they simply double downed and started buying the scrilla.

In other news, we got better-than-expected employment data, as both jobless claims and the ADP report printed in the green.

The ADP non-farm employment change report indicated that 176,000 jobs were added to the economy last month, which was much better than the projected 103,000 figure. This was also a nice improvement from the previous release of 136,000.

Meanwhile, unemployment claims came in at just 374,000, which was a pleasant surprise as we’ve seen the 4-week rolling average stay above the 380,000 level the past five weeks. Of course, one week of data doesn’t make a trend, so we’ll have to keep an eye out on this over the next few weeks.

The one bit of bad news we did see during the New York session was the ISM non-manufacturing PMI. The index failed to hit projections of a reading of 53.1, as it printed as just 52.1. Still, this didn’t deter the dollar bulls from rampaging through the markets.

For those of you who missed all the action yesterday, I’ve got some good news for you! The action continues tonight, as we’ve got the granddaddy of all economic reports headed our way at 12:30 pm GMT, the U.S. non-farm payrolls report!

Word on the street is that the report will show a net jobs gain of just 97,000. But seeing as how the ADP report gave us an upside surprise, we may just see the same for today’s NFP report!

In any case, make sure you check out Forex Gump’s latest post for the nitty-gritty on the NFP report!

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Thank you bad data! The U.S. dollar once again benefited from safe haven flows as the non-farm payrolls failed to meet market expectations last Friday. The U.S. dollar index, which tracks the currencies performance versus a basket of other major currencies, was able to mark a new monthly high at 83.91.

The U.S. non-farm payrolls showed that 80,000 net jobs were added in June, significantly lower than the 97,000 the market had initially predicted. In addition, the unemployment rate failed to show improvement as it remained at 8.2%. The only “good news” from the non-farm payrolls was that the previous month’s 69,000 was revised up to 77,000.

Strictly speaking, it wasn’t a terrible number, but it was disappointing. The economy is adding more workers but job creation just can’t keep up with the number of people entering the workforce. As a result, the unemployment rate is not improving.

This week, we’ve got a number of red flags on the U.S. economic calendar. Let me list them for you one by one.

On Wednesday, the U.S. trade balance will be released. It’ll come out at 12:30 pm GMT and is expected to show a 48.7 billion USD deficit. Last month, the deficit was at 50.1 billion USD. The FOMC meeting minutes will also be published on the same day at 6:00 pm GMT.

On Thursday, there’s the weekly initial jobless claims report. The forecast is that the number of people who claimed unemployment insurance has increased to 379,000 from 374,000 the previous week.

On Friday, the Producer Price Index and the University of Michigan Consumer Sentiment Survey will print. The PPI is slated to show a 0.5% increase while the consumer sentiment survey is anticipated to show a reading of 73.5.

As you can see, there are a lot of major reports coming out this week. Better keep a close eye on them as they may serve as catalysts for a sentiment shift! Be careful!

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Party’s over, boys! With no major data on the docket yesterday, the Greenback pared its gains against some of its counterparts. EUR/USD got a 60-pip breather at 1.2315, while USD/CHF also slid by 52 pips to .9751. What rained on the scrilla’s parade?

Aside from the lack of major data from the U.S., QE3-friendly speeches made by Fed head honchos like John Williams motivated the dollar bulls to take profit. In his speech, Williams called for “extraordinary vigilance,” saying that the Fed is ready to do what’s needed to help the economy. No subtle hints there!

It looks like the Greenback will be a puppet to risk appetite and QE rumors again today as only the IBD/TIPP economic optimism data at 2:00 pm GMT is scheduled for release. My ninja instincts tell me that we’ll hear more from Fed officials today, so keep your eyes peeled for any announcements!

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The dollar’s scorecard was as mixed as the reviews for the movie Abraham Lincoln: Vampire Hunter. While it scored a 62-pip gain against the euro and was up 16 pips against the pound, it gave up 17 pips to the yen as USD/JPY closed lower at 79.41.

It looks like the lack of economic reports from the U.S. left the dollar directionless on the charts yesterday. But fret not, Padawans! With the minutes of the most recent FOMC meeting due to be released later, I’m pretty sure the dollar will have an action-packed day.

The release is scheduled at 6:00 pm GMT. Traders will be on their toes for the details behind the Fed’s interest rate decision as they look for hints about QE3. Remember that on June 20, the central bank decided to extend Operation Twist and downgraded their growth and inflation forecasts for the U.S. economy.

If you don’t want to trade the event, maybe you can just play the U.S. trade balance report which is due at 12:30 pm GMT. The forecast is for imports to have exceeded exports by 48.5 billion USD in May. Should the report come in better than expected, we could see the dollar trade higher ahead of the FOMC minutes. Good luck!