Daily Economic Commentary: United States

Trading Discussion News and Economy
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With the help of a couple of upbeat reports, the dollar scored a few blows against its major counterparts, but it was by no means a knockout victory. It snatched 15 pips away from the euro to take EUR/USD to 1.2903, while stealing 40 pips away from the yen to carry USD/JPY up to 78.52.

The first wave of the dollar’s rally came after the ADP non-farm employment report delivered an upside surprise. Jobs grew by 162,000 last month, beating forecasts which called for an increase of just 145,000. But keep in mind, although this figure is higher than expected, it’s also a big downgrade from the previous month’s gains of 189,000. So is this really something to celebrate? Hah! Not really.

Afterwards, the ISM non-manufacturing PMI came out with a reading of 55.1 versus the 53.2 consensus forecast. The services industry expanded the most in 6 months in September, as business activity picked up thanks to improved consumer confidence.

Today, it looks like we’ll have a bit of time to mull over yesterday’s reports since we only have tier 2 data on tap. At 12:30 pm GMT, initial jobless claims data will be available. Look for the report to show an increase from 359,000 to 371,000. After that, we’ll take a look at factory orders, which is expected to post a 6.0% decline for the month of August, following July’s 2.8% uptick.

Last but not least, we have the FOMC meeting minutes scheduled for release at 6:00 pm GMT. The markets will be watching this like a hawk since it covers the Fed’s recent QE3 announcement, so don’t miss it!

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Ka-boooom!!! Obama wasn’t the only one who received thumbs down yesterday as the Greenback also tanked against its counterparts. EUR/USD shot up by 116 pips while USD/CHF plunged by 82 pips. What the heck happened to the scrilla?

The dollar’s counterparts started the party early in the London session when the BOE and the ECB’s interest rate decisions revealed that the central banks aren’t adding to their stimulus efforts this month. Not only that, but ECB’s Mario Draghi also expressed his confidence that his OMT program would work!

And then there’s the generally weaker-than-expected data from the U.S. that fueled the dollar selloff in the U.S. session. The Challenger job report showed that the U.S.-based companies are planning to cut 33,816 jobs in September, up by 4.9% from August’s 32,229 figure.

Meanwhile, the initial jobless claims rose to 367,000 from last week’s 363,000 figure. Heck, even the factory orders report disappointed with a 5.2% decrease from last month’s 2.8% uptick! Last but not the least, the Fed’s FOMC minutes showed the central bank’s focus on the weak jobs report and its willingness to cough up more stimulus if needed.

Let’s see if today’s NFP report will test the Fed’s conviction on providing more stimulus. If you’re planning on trading the employment-related reports coming up at 12:30 pm GMT, then you might want to read up on the scenarios that Forex Gump pointed out.

Good luck and stay safe in your trades, homies!

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If you were expecting fireworks during NFP Friday, then you were right! Thanks to much stronger than expected U.S. jobs data, the U.S. dollar staged a stellar rally during the release. Let’s take a look at how the employment numbers turned out!

The September NFP figure came in line with expectations at 114K while the previous month’s figure was revised upwards from 96K to 142K. This was enough to bring the jobless rate down from 8.1% to a jaw-dropping 7.8% instead of rising to 8.2%. This marks the first time that the unemployment rate dipped below the 8.0% mark during President Obama’s term, prompting several market watchers to speculate that the incumbent government simply tweaked the numbers to help Obama’s election campaign.

A closer look at the components of the labor report would reveal that there are still plenty of weaknesses in the U.S. jobs market. For one thing, the labor participation rate revealed that most workers looking for full-time jobs resorted to part-time jobs while the establishment survey showed that job creation continues to be sluggish.

Nonetheless, the U.S. dollar surged after the release as most traders saw the upbeat NFP report as a sign that the Fed wouldn’t need to implement further easing later on.

There are no reports due from the U.S. today as banks are closed in observance of Columbus Day. With that, the U.S. dollar might retreat from its recent rallies as traders get a peek at some of the questionable parts of the September labor report.

The first U.S. economic release for the week will take place on Wednesday when the Fed publishes its Beige Book, which will contain their latest assessment of the U.S. economy. On Thursday, the U.S. will release its trade balance and initial jobless claims while PPI data and consumer sentiment figures are due Friday.

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Mixed results for the scrilla, which pounced on the weakness of the European currencies, but stumbled against the comdolls. EUR/USD dropped 56 pips to finish at 1.2971, while AUD/USD rallied 37 pips to end at 1.0196.

With U.S. traders making their way back to their desks after enjoying the long weekend, we could see bigger moves during today’s New York session. Keep in mind that while there’s no hard data set to be released, it is earnings season and word on the street is that traders aren’t expecting the moolah to come flowing in.

Concerns about China and Europe have some companies thinking that they’ll miss analysts’ forecasts and post the worst earnings figures in over three years. If this happens, it could trigger a sell-off in the equities market, which in turn may spark some risk aversion.

In any case, pay close attention to the equity markets and get your risk sentiment clues from there!

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The dollar was at the top of the pack along with the yen as risk aversion dominated market sentiment. EUR/USD finished yesterday’s trading at 1.2869 after opening at 1.2971. Meanwhile, USD/CHF closed 83 pips higher at .9414.

Word around the hood is that investors flocked out of higher-yielding currencies as they braced for a weak earnings season. Consequently, the jitters in the equity markets spilled over to currencies. Of course, it also did not help that Spanish and Portuguese bond yields rose. It would seem that market participants are still worried about the fate of Spain if it doesn’t ask for a bailout.

The better-than-expected confidence report from the U.S. must have also given traders one more reason to buy the dollar. The IBD Economic Optimism report for October printed at 54.0 versus the 52.3 forecast.

Our forex calendar has the Beige Book scheduled for today at 7:00 pm GMT. The report should reflect the Fed’s outlook on the economy and could affect the dollar’s price action. Should it hint that the central bank is willing to implement more stimulus measures, we could see the dollar’s rally come to a halt. So keep tabs on it!

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The dollar finally let up on its rally yesterday, allowing higher-yielding currencies to recover some of their recent losses. Without any major catalysts to shake up the markets, EUR/USD found itself drifting higher and ending the day at 1.2901. Meanwhile, Cable crawled 23 pips up to settle at 1.6011.

The release of the Beige Book turned out to be a major dud as it didn’t reveal anything particularly noteworthy. On one hand, the economy did show a “modest” expansion last month, thanks in part to improvements in auto sales and the housing market. But on the other hand, the labor market hasn’t really made progress and consumer spending has been flat.

Today, the markets will be shifting their attention to the upcoming trade balance and initial jobless claims reports which are due at 12:30 pm GMT. According to forecasts, we’ll probably see the U.S. trade deficit widen slightly from 42.0 to 44.1. Meanwhile, jobless claims are expected to clock in at 368,000, up from last week’s 367,000.

Also, keep in mind that a whole bunch of Fed members are scheduled to speak today, so stay alert and be on the lookout for hints on future policy moves!

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Talk about having a terrible Thursday! The dollar scored losses against all of the major higher-yielders in yesterday’s trading. But it wasn’t all bad for the Greenback! After three consecutive losses against the yen, it finally scored a win. USD/JPY finished the day higher at 78.34 after opening at 78.15.

Better-than-expected unemployment claims data encouraged risk-taking in the markets yesterday. Statistics reveal that those who filed for unemployment benefits were at their lowest in four and a half years at 339,000 last week. The figure came as a surprise to investors who anticipated the report to print at 368,000.

Don’t get carried away though! You should know that the data could be distorted as one state didn’t make the necessary readjustments to the calculation. More importantly, it’s very unlikely for the Fed to withdraw its stimulus measures just because of one positive unemployment claims report.

But let us not take for granted yesterday’s price action. It would seem that markets are desperate for every bit of good news. With that said, make sure you’re on your toes for the reports we have on tap from the U.S. as they could affect market sentiment today too.

At 1:30 pm GMT, the PPI report for September is seen to come in at -0.8% while the core reading is anticipated at -0.2%. Then at 2:55 pm GMT, the UoM Consumer Sentiment index has been estimated to print at 78.1 for October.

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Despite the relatively light economic calendar, the Greenback was unable to hold its ground and turned lower against most major currencies last Friday. The U.S. dollar index marked its third straight losing day as it closed at the 80.13 level.

The economic data that was released was mixed.The headline PPI figure came in better than expected at 1.1% versus the 0.8% forecast, but the core version of the report failed to meet expectations and showed a flat reading versus the 0.2% consensus. The preliminary University of Michigan consumer survey fared much better. It was notably higher than forecast, printing a reading of 83.1. Market participants had initially expected a 78.1 figure.

Looking ahead, it seems that the U.S. economic cupboard is filled to the brim as a lot of news releases are scheduled to print.

Today, the U.S. retail sales report will be published at 12:30 pm GMT. The core figure is slated to show an increase of 0.6% while the headline figure is projected to show a 0.7% rise. Then tomorrow, the big report to watch out for is the U.S. consumer price index. It’ll also come out at 12:30 pm.

On Thursday, awaits the weekly unemployment claims and the Philadelphia Manufacturing Index. Jobless claims are predicted to have risen to 367,000 from the previous week’s 339,000 while the Philly Fed Manufacturing will likely climb to 0.5. The last major report that will be released from the U.S. is the existing home sales. It’ll print on Friday and the forecast is 4.73 million.

With the amount of data releases this week, I suspect we’ll see a lot of action from the Greenback. Do well, traders!

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Could this be a sign that times are changing? Despite strong retail sales figures, higher yielding currencies were unable to take advantage of the Greenback, as EUR/USD closed just 6 pips higher at 1.2954, while Cable finished at 1.6071, 4 pips below its opening price.

Both core and headline retail sales increased by 1.1% in September, which can be taken as a sign of strength in consumer spending. Not only was this was much better than projected, but it was also a strong follow-up to August’s promising figures. Are Americans back to their old spending habits?

Meanwhile, we got some mixed data from other economic reports. Yes, the Empire state manufacturing index came in worse than expected at -6.2, but it was still a decent improvement from last month’s reading of -10.4.

Business inventories also increased by 0.6% in August, which traditionally means that business haven’t been able to get rid of their inventory. The optimist in me though, wants to believe that inventories are on the rise because companies have stockpiled goods in anticipation of a strong run during the last quarter of the year.

Curiously though, the combination of reports didn’t boost risk appetite at all. Could this be a sign that we’re headed back to a time where fundamentals ruled the market?

For today, we’ve got another round of second tier data headed our way, starting at 12:30 pm GMT, with the monthly CPI report. Expectations are that core inflation will clock in at 0.2%, while headline CPI will print at 0.4%.

Later on at 1:00 pm GMT, the Treasury International Capital will be releasing its long-term purchases report, which represents the net difference between the amount of U.S. securities bought by foreigners and the amount of foreign denominated securities bought by the U.S. Early estimates are predicting a decrease in the number from 67.0 billion USD down to 45.3 billion USD in August, which would essentially reflect lower demand for the dollar.

Lastly, we get industrial production figures at 1:15 pm GMT. Word on the yard is that production rose by 0.2%, which would be a decent improvement from the 1.2% decline we saw the month before.

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With risk appetite back in play, you can almost always be certain that the dollar was sold-off heavily yesterday without even looking at the charts. The U.S. dollar index, which tracks the performance of the Greenback versus a basket of major currencies, broke below the closely watched 80.00 handle and closed the day at 79.83.

Risk appetite was the result of a combination of events. First was the better-than-expected German ZEW economic survey. It printed a reading of -11.5, which was higher than the -14.6 reading the market had initially expected. Second was the rumor that went around that Spain might finally request a bailout come November. Finally, Moody’s kept Spain’s debt at investment grade, which leads to speculation that Spain wouldn’t even need actual funding but simply just a credit line.

In the U.S., data was mixed. The core CPI failed to meet expectations and showed that the inflation rate was only at 0.1%. The forecast was 0.2%. On the other hand, the headline CPI came in at 0.6% versus the 0.4% forecast.

For today, the Greenback’s price action will depend on the result of the building permits and housing starts later. Scheduled to publish at 12:30 pm GMT, the building permits report is anticipated to show an 810,000 figure while housing starts is projected to show a 770,000 figure. If they come in better than expected, we could see another risk rally.

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There’s no stopping the dollar bears! Thanks to continued risk appetite in the markets, the Greenback was stuck in hostile territory yesterday. EUR/USD jumped by another 71 pips while USD/CHF fell by 41 pips. What motivated the dollar bears this time?

It wasn’t the U.S. economic reports, that’s for sure. The U.S. housing starts jumped by 15% to its four-year high, while the building permits also rose by 11%. Booyah!

Unfortunately for the Greenback, investors were too busy looking at the euro region to notice the positive data. See, the employment numbers printed better-than-expected for the U.K., while Moody’s affirmed Spain’s above junk bond ratings.

Let’s see if market players give attention to the initial jobless claims coming out at 12:30 pm GMT and the Philly Fed manufacturing index scheduled at 2:00 pm GMT.

If both reports print strong figures like the ones that we’ve been seeing from the U.S. lately, then we might see risk appetite fuel the rally of the high-yielding currencies. On the other hand, if both reports print strong numbers and sentiment is shaky in the euro region, then we might see a return to fundamentals, which could retrace some of the dollar’s intraweek losses.

Good luck trading this week, kids!

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The Greenback sure knows how to bring sexy back! The U.S. currency was able to rally against its major counterparts during yesterday’s trading as a combination of risk aversion and strong U.S. data gave it a boost. Can the Greenback hold on to its gains until the weekend?

Let’s start with the data! The Philly Fed index came in stronger than expected this month as it climbed from -1.9 to 5.7, surpassing the consensus at 1.3. This marks the first time in nearly half a year that the manufacturing index landed back in the positive territory, which indicates industry expansion. However, a closer look at the report’s components revealed that the increase was mostly a result of higher prices rather than actual improvements in hiring and production.

Meanwhile, U.S. jobless claims came in a bit worse than expected at 388K, which was higher than the estimated 367K reading. This led several market watchers to suspect that the “recovery” in the U.S. labor market, as seen from the most recent NFP report, was merely a fluke.

For today, only the existing home sales figure is set for release today and this report is expected to show a drop from 4.82M to 4.73M in September. Take note though, that we’ve been seeing better than expected reports from the U.S. housing industry lately so there might be a chance the actual figure could surprise to the upside. Keep an eye out for the actual release at 2:00 pm GMT!

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Back-to-back, baby! The dollar clobbered its counterparts for a second day in a row last Friday after risk aversion and weak U.S. data maintained demand for the low-yielding Greenback. EUR/USD fell by 52 pips while USD/CHF jumped by 43 pips.

As if the weak corporate earnings in the U.S. wasn’t enough, the surprisingly weak existing home sales data also added to the risk aversion theme last Friday. The report broke the streak of upside surprises in the U.S. data when it came in at 4.75 million, lower than the 4.83 million reading in August. Of course, it as also helped that the EU Summit didn’t produce any market-shaking improvements.

Only a speech by FOMC member Sandra Pianolto is scheduled today at 5:30 pm GMT, but it looks like we got a couple of big hitters for the rest of the week!

For starters, we’ll see the Richmond manufacturing index tomorrow at 2:00 pm GMT, followed by the manufacturing PMI, new home sales, AND the FOMC statement on Wednesday. On Thursday we’ll get hold of the durable goods orders and the pending home sales, while the big GDP report will come in on Friday at 12:30 pm GMT.

Good luck and good trading, homies!

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The Greenback sure knows how to mix things up! During yesterday’s trading, the U.S. currency closed higher against the Japanese yen and lower against the euro, Loonie, Swissy, and Kiwi. Meanwhile, its scuffle with the pound and the Aussie ended in a stalemate.

Yesterday’s lack of top-tier reports from the U.S. or any of the major economies was probably to blame for the Greenback’s lack of direction. We might be in for another mixed performance by the Greenback today as the U.S. economic schedule is empty once again.

Do keep in mind though that any updates on the euro zone debt situation, particularly those concerning Spain’s bailout prospects, could have a huge impact on risk sentiment. Stay on your toes at all times!

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Total domination! These are the two words that could perfectly describe the Greenback’s price action yesterday. The currency, for instance, posted significant gains versus both the euro and the pound, climbing 76 pips and 58 pips respectively.

The Greenback’s rally yesterday was fueled mostly by risk aversion. Apparently, Moody’s decided to downgrade the credit ratings of five Spanish regions including Catalonia, Extremadura, Andalucia, Castilla-La Mancha, and Murcia. Moody’s indicated that the downgrades were due the limited cash reserves.

No data was released in the U.S. yesterday but there are a few tier 1 events scheduled today starting with the new home sales report. It’s going to be published at 2:00 pm GMT and it’s expected to show that the annualized number of new home sales have gone up to 386,000 in September from 373,000 in August. Rising home purchases are usually considered bullish for the domestic currency.

At 6:15 pm GMT, the Fed is set to announce its decision on interest rates. The central bank is widely predicted to keep rates below 0.25% and maintain its 40 billion USD per month pace of MBS purchases. Until there’s significant improvement in the U.S. economic outlook, the Fed will probably keep its monetary policy stance.

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Well, that was a dud, wasn’t it? The FOMC statement barely made waves across the dollar pairs yesterday as the Fed didn’t make any changes to monetary policy. EUR/USD tested the 1.3000 area briefly before closing at 1.2961 while USD/JPY stayed stuck below the 80.00 handle.

The Fed kept interest rates on hold as expected and didn’t announce any additional easing measures during their latest FOMC monetary policy statement. Market watchers who were also expecting some form of optimism from the U.S. central bank after seeing slight improvements in the labor market and in consumer spending were also disappointed.

Today, the U.S. is set to release a bunch of top-tier reports starting from its durable goods orders data at 1:30 pm GMT. The headline figure is expected to show a 7.1% rebound over the 13.2% decline seen last August while the core figure is estimated to print a 0.8% uptick. The initial jobless claims report will also be released at 1:30 pm GMT and is looking at a 371K rise in first-time unemployment claimants.

At 3:00 pm GMT, the U.S. will print its pending home sales report for the month of September. After slipping by 2.6% in August, pending home sales are expected to bounce back by 2.3% the following month.

Make sure you keep close tabs on those reports because stronger than expected figures could spur risk appetite and trigger a safe-haven selloff. Good luck!

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Someone’s been hitting the gym! The dollar flexed its muscles against its major counterparts yesterday as it snatched 16 pips away from the euro and stole 48 pips from the yen. Will today’s GDP report extend its gains?

It wasn’t so surprising to see the dollar show its strength yesterday, considering that the U.S. published some pretty upbeat reports. For one, durable goods orders showed a 9.9% increase last month, which is a nice rebound from August’s 13.1% decline. Meanwhile, initial jobless claims fell from 392,000 to 369,000 last week, far better than the 371,000 that many had expected. The only downer was the pending home sales report, which revealed a 0.3% rise instead of the median forecast of a 2.3% surge.

But enough about that, let’s move on to today’s big event - the release of the advance GDP report!

Forecasts say that the economy probably expanded by 1.9% last quarter, which is a nice improvement from the 1.3% uptick in Q2. It’s generally believed that growth picked up its pace because of improvements in the labor market, household spending, and trade.

Should the report print upbeat results, it could lead to a dollar rally. On the other hand, if it disappoints, I wouldn’t be surprised to see the dollar sell off. In any case, there’s a good chance we’ll see plenty of activity on the charts when the report comes out later in the New York session. Don’t miss the action at 12:30 pm GMT!

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Better-than-expected data? So what? The currency bulls weren’t too impressed with the Greenback last Friday as it barely ended the day higher against its counterparts. EUR/USD only slipped by 9 pips while Cable lost 38 pips. What’s up with that?

Don’t blame it on the U.S. data! Uncle Sam’s GDP showed a 2.0% growth in the third quarter, which is faster than the 1.8% growth that market geeks were expecting. Apparently, the impact of the drought was offset by consumer and government spending.

Speaking of consumers, you should know that the revised UoM consumer confidence also should’ve contributed to the Greenback lovin’ as it printed at 82.6, a five year high. Booyah!

Unfortunately for the dollar bulls, investors were also paying attention to U.S. corporate earnings, which have been disappointing investors all week. Add to that a possible volatility of the NFP week ahead and it’s no wonder why some investors are unwinding their positions.

Will the dollar get its mojo back this NFP week? The action could start on Tuesday with the CB consumer confidence on tap, followed by the Chicago PMI on Wednesday, ADP report and ISM manufacturing PMI on Thursday, and the Grandaddy of economic reports, the NFP, due on Friday.

Stick around for more updates as the week progresses, homies!

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Will you look at that! Rather than shying away from the dollar in light of Hurricane Sandy, the markets flocked towards it as safe haven flows benefited the American currency. After an entire day’s worth of trading, it had managed to snatch 48 pips away from the euro and steal 81 pips from the pound.

It seems our friends in the east coast of the U.S. aren’t the only ones taking shelter from Hurricane Sandy! Even the markets sought safe havens, and they found refuge it in the good ole dollar! Demand for the dollar got a solid boost as market players braced for the storm’s devastating effects, even as trading was thin yesterday.

In other news, the markets hardly reacted to news that consumer spending picked up more than expected last month. It rose by 0.8%, beating forecasts that called for a 0.6% uptick, thanks largely to a decline in savings.

Meanwhile, the core PCE price index, which is widely known as the Fed’s price index of choice, came in just as expected at 0.1%.

Today, we only have the S&P/CS Composite-20 HPI on tap, and survey says it’ll deliver a 0.2% increase following the previous month’s 0.1% decrease.

If you plan on trading the dollar, keep in mind that all the U.S. major stock markets will be closed today, so trading may be a bit thin once again in the New York session. That being said, chart action today may turn out to be very similar to what we saw yesterday. In any case, be careful out there, folks! Thin markets can lead to unpredictably wild action sometimes!

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With risk appetite running the markets, the dollar fell victim to its major counterparts, as the euro, pound, and yen all finished higher versus the scrilla. Can the Greenback make a comeback or will we see more dollar weakness?

Aside from the improvement in risk sentiment, the dollar also suffered as USD/JPY dropped thanks to disappointment in the Bank of Japan’s QE plans. Make sure y’all hit up my Japan commentary for the 411 on the BOJ’s latest monetary policy moves!

Meanwhile, better-than-expected Spanish GDP figure and successful Italian bond auctions also did their part in helping boost higher yielding assets.

For today, we’ve got the Chicago PMI lined up at 1:45 pm GMT. The report, which basically measures managers’ sentiment across the Chicago area, is projected to rise from last month’s reading of 49.7 to 51.0. Take note that last month was the first time since 2009 that the index dipped below the crucial 50.0. This indicated that managers were becoming more pessimistic about the state of the economy.

If today’s report prints below 50.0 once again, it could shift the tide in favour of risk aversion. Watch out!