Daily Economic Commentary: United States

Trading Discussion News and Economy
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No risk aversion this time around! With traders generally feeling more upbeat, the dollar tracked lower against most of its counterparts. What kind of action can we expect today?

The markets haven’t had any significant U.S. reports to work with for a while now, so they’ll probably be eager to see the results of today’s heavy releases.

The U.S. is set to unload some notable reports later in the New York session, starting with the ADP employment change report at 12:15 pm GMT. As a leading indicator for the NFP report, this report is a must-catch! Look for it to show an increase of 142,000 jobs, down from the previous month’s surge of 163,000.

Fifteen minutes after that, we’ll take a look at initial jobless claims numbers. Survey says last week’s claims probably reached 369,000, which is just slightly lower than the 374,000 we saw the previous week.

Last but not least, at 2:00 pm GMT, the U.S. will roll out its latest ISM non-manufacturing PMI. Out of all of today’s releases, this is probably the best for trading the news, as this report has a history of shaking up the markets. Should results come in strong (the index is expected to rise from 52.6 to 52.5), a dollar rally could ensue.

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What a good day for the dollar bears! Thanks to strong data from the U.S. and risk appetite in markets, investors bought high-yielding currencies like there’s no tomorrow. As a result, USD/CHF plunged by 25 pips while EUR/USD shot up by 43 pips. What’s in store for the dollar today?

If you’re one of them day traders, then you’re in for a treat! At 12:30 pm GMT the motherlode of economic reports, the U.S. non-farm payrolls, will be released along with the unemployment rate.

Market players are expecting a number higher than 120,000 thanks to the drop in job cuts that we saw in the Challenger report, as well as the surprise upticks in the ADP and the non-manufacturing numbers printed yesterday.

Will an upside surprise in the NFP trigger another rally in high-yielding currencies? As I mentioned in my EUR piece, Super Mario’s speech yesterday triggered a broad-based rally in high-yielding currencies as it signaled that the central bank is actively helping in bringing down the peripheral bond yields.

If the NFP comes out way better than expected, then markets could interpret it as a sign that the Fed won’t be pulling the QE3 trigger, which could boost the dollar against its counterparts. On the other hand, investors could also take it as a sign that the world’s largest economy isn’t as bad as initially thought, which could spark a risk rally among the high-yielding currencies.

No matter which side you’re on today, make sure that you follow your trading plan!

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Last Friday proved to be disastrous for dollar bulls as the American currency lost big time against its major counterparts. Once the markets got a look at the horrific NFP results, they sold the dollar off and pushed EUR/USD to settle 168 pips higher at 1.2805.

Now that’s what I call closing the week with a bang! As usual, with the NFP results came fireworks, but this time it was dollar bears’ turn to celebrate.

Non-farm payrolls came in much worse than expected last month as only 96,000 jobs were added in August, instead of the 123,000 that most economists had predicted. Meanwhile, the unemployment rate dipped from 8.3% to 8.1% as more workers left the work force in August, and to make matters worse, the previous month’s jobs growth of 163,000 was revised down to just 141,000, .

This report makes July’s NFP results seem like nothing but a fluke! Will the U.S.’ employment slump ever come to and end?

That the job market posted another month of ugly figures has fueled bets for QE3, which explains why the dollar was dumped so aggressively. Remember, the Fed has made it clear in the past that it’s carefully tracking the employment situation, so if the job market doesn’t show significant signs of improvement soon, it could seal the deal for more stimulus.

The main reports to catch this week are the FOMC statement (due 4:30 pm GMT on Thursday) and the U.S. retail sales report (due 12:30 pm GMT on Friday). Tune in again later this week to find out what you should expect from these market movers!

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Call it a comeback Monday for the scrilla baby! With no hard data on tap, we saw some profit taking take place, with the dollar posting decent gains versus the euro and Australian dollar. EUR/USD fell 52 pips finish at 1.2759, while AUD/USD closed at 1.0336, 29 pips below its opening price.

With the market still waiting for the German high court ruling and the FOMC statement coming up later this week, traders unloaded their positions in higher yielding currencies, allowing the dollar to pare back its losses from last Friday.

For today, all we’ve got is trade balance figures due at 12:30 pm GMT. Expectations are that a deficit of 44.2 billion USD was posted in July, slightly more than the previous month’s 42.9 billion USD deficit. Still, I don’t expect this to move the markets, and we should continue to see more consolidation.

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Tough luck! The Greenback was still unable to get back on its feet during yesterday’s trading as it continued to lose ground against its major counterparts. Aside from QE3 speculations, what else is weighing the Greenback down?

As though the U.S. dollar doesn’t have enough troubles on its mind, credit rating agency Moody’s warned the U.S. about a potential debt downgrade unless the Congress is able to come up with something that’d keep their economy from the dreaded fiscal cliff next year. Recall that S&P already downgraded U.S. debt from AAA to AA+ more than a year ago and Moody’s hinted that they might be the next credit rating agency to strip Uncle Sam of its pristine triple-A rating.

As for economic data, U.S. trade balance came in slightly better than expected as it printed a 42 billion USD deficit, smaller than the estimated 44.2 billion USD shortfall for July. On top of that, the June figure was revised up to show a 41.9 billion USD deficit instead of the initially estimated 42.9 billion USD shortfall.

However, traders seemed to ignore this better than expected piece of economic news as they focused on their pricing in their expectations of further easing from the Fed tomorrow. With no red flags on the U.S. schedule for today, market participants could keep shorting the U.S. dollar as they believe that the odds of QE3 are much greater this time around.

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Are traders pricing in QE3? It sure seems that way, as the dollar’s been getting smacked around the past couple of days. The euro and pound edged higher, while the comdolls maintained their lead versus the Greenback. With the FOMC announcement just around the corner, what could be in store for us today?

The reason why the scrilla has been taking some hits lately is because some traders are already positioning themselves in anticipation of the announcement of QE3 during the FOMC statement. With all the poor data Uncle Sam’s been submitting as of late, some feel that the Fed has no choice but to introduce additional liquidity measures to help boost the economy.

Of course, there’s no telling what might actually happen, so that’s why you should tune in at 4:30 pm when Fed Big Boss Bernanke steps up to the plate. His speech should help divulge more information, such as the size, timing, and limitations of the program.

Just keep in mind that QE2 clocked in at 600 billion USD, with bond purchases spread over 8 months. If QE3 is much smaller in size or is to be implemented over a shorter period of time, it could help the dollar recover some of its recent losses.

Lastly, don’t forget homies, that we also have other data on tap earlier in the New York session, in the form of the producer price index and weekly jobless claims report, both of which will be released at 12:30 pm GMT.

The PPI is seen to print at 1.1%, which would be a sharp rise from the 0.3% pace we saw the month before. Meanwhile, the four-week unemployment claims average is seen to rise from 365,000 last week to 370,000.

Still, I’m not too sure how much these two reports will affect the market, as most playas will likely just be waiting for the FOMC statement or trying to figure out how to pre-order an iPhone5. In any case, stay on your toes, as we could be in for some wild moves today!

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The dollar sank down the charts like the Titanic following Fed Chairman Ben Bernanke’s statement. It gave up 98 pips to the euro, 85 pips to the Aussie, and 33 pips to the yen.

Bernanke took out the big guns in yesterday’s FOMC statement and announced that the Fed will launch an open-ended QE. The central bank promised to purchase 40 billion USD-worth of mortgage-backed securities every month with no expiration date. As if that wasn’t enough to get dollar bears pouncing, Big Ben also said that the Fed will keep interest rates low from 2014 to 2015 and warned that if the labor market doesn’t pick up, they wouldn’t hesitate on launching more stimulus measures.

There were other reports on the docket too, but they took the backseat to the Fed’s statement. Unemployment claims were higher than the 370,000 consensus at 382,000. Meanwhile, the PPI for August printed higher at 1.7% than the 1.1% forecast.

And you know what, I have a feeling that the rest of the reports that we have for the week will be overshadowed by the FOMC statement. Big Ben was as dovish as he could be yesterday and I don’t think markets would easily forget his remarks.

However, it would still do you well to keep tabs on the reports as they could still affect the dollar’s price action.

At 12:30 pm GMT, the CPI report for August will be on tap with the core reading anticipated to come in at 0.2% and the headline figure seen at 0.5%. Data on consumer spending will also be released with both the core and headline numbers estimated at 0.7%.

Then at 1:55 pm GMT, the preliminary University of Michigan Consumer Sentiment index is predicted to come in at 74.1.

In my own humble opinion, worse-than-expected numbers will probably have more impact on the currency and fuel the dollar’s slide even more as they would affirm the Fed’s decision to ease policy even further. But that’s just me. Stay tuned later, ayt?

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The bleeding didn’t stop last Friday as the dollar extended its losses against its major counterparts. While EUR/USD found itself 131 pips higher at 1.3120, GBP/USD managed to climb 76 pips to greet the weekend at 1.6227.

According to the latest report, retail sales were up 0.9% last month, which is better than the 0.7% uptick that most had expected… but don’t let this number fool you! A big chunk of the increase is due to the big rise in oil prices in August. As a matter of fact, excluding gas station sales, retail sales was only up 0.3%!

To make matters worse, the previous month’s growth of 0.8% was revised down to 0.6%. Now that we put it that way, it certainly seems like the Fed made the right choice in granting QE3, eh?

In other news, headline CPI showed a 0.6% increase in prices in August following the 0.0% reading in July. Meanwhile, core CPI only showed a 0.1% increase, which once again proves that gas prices were responsible for a good portion of the change in headline CPI.

We got one last surprise from the University of Michigan, which revealed that consumer sentiment is at its highest level in 5 years! According to the consumer sentiment index (which rose from 74.3 to 79.2), Americans are more upbeat because they’re optimistic about the job situation. I know, I know… Surprising, right?! In any case, it’ll be interesting to see if these gains can be sustained in the coming months!

Today, we only have the Empire State manufacturing index on tap at 12:30 pm GMT. Look for it to post a reading of -1.9, down from -5.9 the previous month. Later in the week, we have a few more notable releases, such as the building permits and existing home sales reports (Wednesday), and the Philly Fed manufacturing index (Thursday).

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The dollar’s performance on the charts yesterday was as mixed as a bag of M&M’s. It traded sideways against most of its counterparts, giving up pips to its European currencies but scoring wins against the comdolls and the yen.

According to a few market junkies, profit-taking after last week’s strong moves still dictated price action in yesterday’s trading. After all, our forex calendar will still blank for market-moving reports. The only piece of economic data that we had on the docket was the Empire State Manufacturing index which printed a much bigger contraction than the -1.9 consensus at -10.4.

There are a few economic releases scheduled for the dollar today. At 12:30 pm GMT, the current account report for Q2 2012 is anticipated to print a 126 billion USD deficit. Then at 1:00 pm, the TIC report is expected to show that foreign purchases of long-term U.S. securities outpaced domestic demand by 37.3 billion USD in July.

Finally at 2:00 pm GMT, the NAHB housing market index is seen to show that housing conditions continued to improve in September. The figure is anticipated at 38.

Although it would be a good idea to keep tabs on these reports, you should also be sure to listen in to what NY Fed President William Dudley has to say in his speech later at 3:30 pm GMT. I’m pretty sure that market junkies will be on their toes for the FOMC voting member’s outlook on the economy. You should too!

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Has Uncle Sam been going to the gym? It appears so, as the Greenback was able to outmuscle the major currencies for the second straight day yesterday. The U.S. dollar index, which tracks the performance of the Greenback versus a basket of currencies, rose to 79.69 from its opening level at 79.44.

Data was pretty light for the U.S. yesterday as only the Current Account Balance and the TIC Long-Term Purchases were released. The Current Account Balance came in with a 117 billion USD deficit while the TIC Long-Term Purchases showed a healthy 67 billion USD. Both reports came in much better than what the market had initially expected.

Today’s cupboard has a couple of tier 1 news reports; namely, building permits, housing starts, and existing home sales. For the building permits, a 790K figure has been forecasted. It’s slightly better than the previous month’s 810K. For the housing starts, the market is expecting 770K, which is also an improvement from the previous month’s 750K. Lastly, existing home sales is slated to rise to 4.57M from 4.47M.

Individually, the reports do not really have a strong effect on price action. Taken together, however, the reports could actually produce a hefty impact on the Greenback!

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Are the dollar bears gearing up for another move? The dollar resumed its losing ways yesterday, as EUR/USD closed 18 pips higher at 1.3056, while AUD/USD ended the day at 1.0488, up 41 pips above its opening price.

Mixed housing data didn’t give the dollar much support, as we saw an improvement in existing home sales and building permits while housing starts dipped slightly.

The annualized pace of existing home sales rose to an impressive 4.82 million, which was way higher than the projected 4.57 million pace. This was also a near 8% increase from the previous month’s figure of 4.47 million. This could suggest that the market for old homes is improving, perhaps due to lower selling prices as owners try to unload their properties.

Meanwhile, we saw contrasting results in the building permits and housing starts figures, as the pace of permits rose to 800,000, while housing starts clocked in at just 750,000. It was anticipated that the two reports would print at 790,000 and 770,000 respectively.

For today, we’ve got another slew of data headed our way, starting with the weekly jobless claims report at 12:30 pm GMT. Claims are projected to come in at 374,000, which would mark a slight improvement from the 382,000 that was posted last week.

Later on at 2:00 pm GMT, the Philadelphia Fed Index will be released. My minions tell me that the index should print at -4.1, which would be slightly higher than the -7.1 score we saw last month. Should the report come in above the 0.0 mark, it may just spark risk appetite, which could lead to another round of losses for the Greenback.

Good luck trading today my fellow forex fanatics!

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Could that be risk aversion creeping back into the scene? After all, the dollar was generally stronger against most of its major counterparts, as EUR/USD, GBP/USD, and AUD/USD all closed lower on the day.

Part of the reason why we saw safe havens rally yesterday was due to poor Chinese data early in the Tokyo session. The Chinese HSBC manufacturing PMI printed at 47.8, marking the ELEVENTH straight time that the index has come in below the 50.0 mark. This indicates that Chinese managers are still pessimistic about the future of their respective industries, which just means a bigger risk to the growth of the Chinese economy.

In any case, this triggered an early round of risk aversion, helping the dollar’s cause.

Unfortunately, data during the New York session wasn’t any better.

First, weekly jobless claims disappointed like a Ben Affleck acting performance, as it printed at 382,000, much higher than the projected 374,000 figure.

Second, while the Philly Fed Index did clock in a better-than-expected score of -1.9, it still marked the 5[SUP]th[/SUP] straight month that the index printed below 0.0. Just like the Chinese HSBC PMI, this means that manufacturers in the Philadelphia area are still pessimistic about the outlook of economy.

We also got comments from Fed member Dennis Lockhart, who talked about the labor market at a conference yesterday. As expected, Lockhart reiterated the tone from the Fed’s last FOMC statement, which was that the central bank is mainly focused on the labor market and that current conditions were not up to par.

For today, we don’t have any hard data on tap, although take note that Lockhart will be speaking again about monetary policy and the outlook of the economy at another conference. Chances are that he’ll simply echo everything that was said at the FOMC statement, but who knows, he might slip and tip the Fed’s hand on other tactics it may have in mind!

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With only Fed member Dennis Lockhart taking center stage last Friday, it’s no surprise that the Greenback ended the week with mixed results against its counterparts. EUR/USD closed with a 17-pip gain at 1.2985 while USD/CHF recovered from an intraday low of .9285 to a .9329 closing price.

As we suspected, Lockhart mostly repeated his sentiments from Thursday, saying that the labor market remains weak in the U.S. and that the new round of Fed stimulus will help in boosting the economy. The lack of data made the dollar vulnerable to the volatility in markets that came after rumors of SNB selling EUR/AUD and Middle East firms buying EUR/USD made its way into the newswires.

Let’s see if we can get a clearer price action from the scrilla this week when a couple of major reports are released. Only a speech by Fed member John Williams is scheduled today, but tomorrow at 1:00 pm GMT we’ll see the S&P house price index report followed by the CB consumer confidence at 2:00 pm GMT. Treasury Secretary Tim Geithner will complete the day at 5:30 pm GMT when he gives his speech in New York.

Other major data scheduled this week include the new home sales on Wednesday at 2:00 pm GMT, the durable goods and initial jobless claims reports on Thursday at 12:30 pm GMT, the pending home sales number at 2:00 pm also on Thursday, and the Chicago PMI report on Friday at 1:45 pm GMT.

The reports above could give clues on how long the Fed will need to implement its open-ended QE3, so you better stick around to monitor the dollar’s price action!

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Put your hands up in the ayer for the dollar! Its performance in yesterday was pretty stellar, scoring wins against all of its counterparts save for the yen. EUR/USD closed the day 44 pips below its opening price at 1.2927 while AUD/USD ended the day at 1.0417 after opening at 1.0417.

There wasn’t any economic report released from the U.S. Luckily for the dollar, risk aversion dominated market sentiment yesterday.

As I said in my EUR commentary, disappointing economic data from Germany hinted that the country could be headed for a recession. News that Greece might be facing a shortfall in its budget and Spain’s refusal to ask for a bailout also weighed down on sentiment.

Traders seem to have there eyes on the three euro zone countries. So, make sure you’re also on your toes for updates from them! More bad news could intensify risk aversion and send the dollar even higher.

Also, keep tabs on the reports that we have on tap from the U.S. today because they will probably affect the currency’s price action.

At 1:00 pm GMT, the S&P house price index for July is anticipated to show that house prices increased by 1.3% during the month. Then at 2:00 pm GMT, Conference Board’s consumer confidence report for September will be released. The consensus is for an increase of 63.1.

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Score another one for the Greenback! Thanks to stronger-than-expected U.S. data and risk aversion in markets, the dollar dominated its counterparts yesterday. EUR/USD fell 67 pips down from its intraday high, while USD/CHF closed 15 pips higher than its open price. Booyah!

The dollar was in the red zone for most of the London and early U.S. session as the euro zone officials projected solidarity through a couple of press conferences. The U.S. data even went with the risk appetite train as the S&P house prices printed a 1.2% uptick for July against June’s 0.6% growth.

The Richmond manufacturing index also clocked in a reading of 4 against its -9 figure in August, while the CB consumer confidence printed its second highest reading since February 2011. With positive figures like these, it’s no wonder the currency bulls were so giddy early in the day!

Unfortunately for the high-yielding currencies, news of violent protests in Spain rained on the risk on parade just before the markets closed. The protests eventually provided opportunity for the currency bears to drag the high-yielding currencies lower against the dollar.

Let’s see if the new home sales data scheduled at 2:00 pm GMT will provide a repeat of yesterday’s price action. The report is expected to come in at 381,000 in August after showing a 372,000 reading in July, but keep an eye out in case we see surprises!

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Thanks to the risk off market environment, the U.S. dollar was able to outpace most of its major counterparts in yesterday’s trading. EUR/USD chalked up another losing day as it closed at 1.2684, more than 20 pips below its 1.2905 open price. Will the Greenback continue to benefit from risk aversion today?

U.S. new home sales were weaker than expected in August as the figure came in at 373K, which was less than the consensus at 381K. This just goes to show that the Fed’s extended period of low interest rates might not be enough to spur a full-scale recovery in the U.S. housing market, and that they’d need to do more later on in order to ensure a housing rebound.

Today, the U.S. is set to release its durable goods orders data, along with the initial jobless claims report, at 1:30 pm GMT. Durable goods orders are expected to be down by 4.7% in August while the core version of the report could show a 0.2% uptick. Meanwhile, initial jobless claims are expected to improve from 382K the other week to 378K for the previous week.

By 3:00 pm GMT, the U.S. will release another housing market indicator in the form of its pending home sales data. For the month of August, pending home sales are expected to be down by 0.4% after chalking up a 2.4% increase in July. Bear in mind that another weaker than expected housing market indicator would reinforce the view that the U.S. is still far from reaching a strong recovery in housing, which could keep risk-taking in check for the rest of the day.

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What do you get when risk appetite is coupled with weak U.S. data? A weak U.S. dollar! The Greenback got clobbered by its counterparts yesterday as EUR/USD climbed by 48 pips to 1.2912 while Cable also enjoyed a 75-pip rally.

Trouble for the dollar bulls began late in the London session when Spain’s government officials delivered their austerity plans. The details of Spain’s plans are in my EUR commentary, but for now all you need to know is that investors ate up their plans like it was ice cream with a big fat cherry on top. This boosted risk appetite in markets, which weighed on the low-yielding dollar.

And then there are the weak U.S. economic reports. The headline figure for durable goods orders dropped by a whopping 13.2% in August, which is not only weaker than the 3.3% growth reading in July, but is also the steepest drop since 2009.

Of course, it didn’t help that the Q2 U.S. GDP was surprisingly revised lower, now showing only a 1.3% growth instead of its previous 1.7% reading. Even the pending home sales data disappointed expectations with a 2.6% decline in August when market players were only expecting a 0.4% slip. Meanwhile, traders ignored the initial jobless claims report, which clocked in at 359,000, the report’s best number since mid-July.

Today the U.S. is scheduled to release its core PCE index at 12:30 pm GMT, followed by the Chicago PMI data at 1:45 pm GMT and the revised UoM consumer sentiment report at 1:55 pm GMT. The reports are expected to show a bit more strength than their previous readings, but as the GDP revision has shown us, surprises could just be around the corners!

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The Greenback ended the third quarter of the year with a bang as it closed higher against its major counterparts last Friday. EUR/USD ended the day at 1.2851 while USD/JPY closed 3 pips above the 78.00 handle. What’s in store for the U.S. dollar today?

Only medium-tier reports were released from the U.S. last Friday and these came in mostly worse than expected. Personal income posted a mere 0.1% uptick while personal spending rose by only 0.5% in August. Meanwhile, Chicago PMI also missed the mark as it dipped below the 50.0 handle and came in at 49.7, indicating a contraction in their manufacturing industry. Lastly, the consumer sentiment index measured by the University of Michigan came in at 78.3, short of the consensus at 79.0 and lower than the previous reading at 79.2.

There are a couple of red flags on the U.S. economic schedule for today and these are the ISM manufacturing PMI and Fed head Bernanke’s speech.

The manufacturing index, which is set for release at 3:00 pm GMT, could show that the contraction slowed down in September as the reading could rise from 49.6 to 49.8. However, a better than expected figure or a reading above 50.0 would reflect a strong improvement in the U.S. manufacturing industry, which could be positive for risk and negative for the Greenback.

Later on, Ben Bernanke is set to give a speech entitled “Five Question about the Federal Reserve and Monetary Policy” which might shed more light on the central bank’s recent decision to implement QE3 and their next monetary policy plans. Keep your eyes and ears peeled for his testimony around 5:30 pm GMT.

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No strong start to Q4 for the dollar. Its performance was anything but stellar as it failed to make headway against most of its major counterparts, despite the release of better-than-expected data. Will today be any different?

The ISM manufacturing PMI shocked a lot of investors as it printed a reading of 51.5, which is far better than the median forecast of 49.8. Thanks to a strong increase in orders, the manufacturing industry was able to break its 3-month streak of contraction. This came as a big surprise mainly because individual regional reports that had been released earlier weren’t very upbeat, so the markets weren’t expecting much from the national version of the report.

After that, the spotlight shifted to Fed Chairman Ben Bernanke, who tried his best to defend the Fed’s QE3 program. He spoke up to appease the program’s haters by saying that the move was necessary to boost the economy and promote jobs growth. He also said that he and his boys plan to keep stimulus measures in place even after the economy shows signs of recovery.

If that doesn’t show his commitment to easy monetary policy, I don’t know what will! Hmm… Kind of makes you wonder if the Fed has any more tricks up its sleeve, eh?

Nothing on the calendar for today. In the meantime, I suggest y’all track risk sentiment to see if the markets will be dollar bullish or bearish today. Good luck, homies!

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The Greenback’s performance was as mixed as a bag of jellybeans yesterday as traders focused on risk appetite in the markets. USD/CHF dropped for a second day in a row, but USD/JPY also rose by 10 pips. What the heck was influencing risk sentiment anyway?

With no major data out from the U.S. yesterday, economic themes like the Spanish bailout story dominated currency price action. See, Spanish officials are denying the possibility of a bailout in the near future while investors are all but pricing it in. Meanwhile, the RBA provided some action in the late Asian session as it surprisingly cut its rates. But more on that in my AUD piece.

Today is a good day for news traders who like U.S. economic reports. At 12:15 pm GMT we’ll get our first glimpse on the state of the U.S. jobs market when the ADP report is released. The ISM non-manufacturing PMI, another closely watched jobs report, will follow at 2:00 pm GMT. Both reports are expected to come in a bit weaker than their figures last month, but make sure your trading plans have provisions for surprises!