Daily Economic Commentary: United States

Trading Discussion News and Economy
915

Lady Luck wasn’t on the dollar’s side yesterday. The Greenback was hustlin’ the euro during the Tokyo and London sessions when it all of a sudden lost its upperhand. EUR/USD then finished the day just 2 pips below its opening price at 1.2932.

Meanwhile, the dollar continued to stack up its losses against the yen, giving up 26 pips to the Asian currency in yesterday’s trading.

The not-so-optimistic Beige Book might have something to do with the dollar’s poor performance. However, for the most part, the downbeat tone of the report had a lot to do with Hurricane Sandy. In regard to the economy, it revealed that most Fed officials only expanded at a “measured pace” as the Fiscal Cliff draws nearer.

It might have also not helped the dollar that the new home sales report for October came in lower than expected at 368,000 when the consensus was up at 387,000.

We’ll probably see economic reports from the U.S. continue to affect the dollar’s price action in today’s trading, so make sure you don’t miss them! At 1:30 pm GMT, the preliminary GDP report for the third quarter will be released and it is anticipated to print at 2.8%.

Along with that, the unemployment claims report will also be on tap and it is anticipated at 392,000.

Finally, at 3:00 pm, the pending home sales report for September is eyed at 0.9%.

916

The dollar’s scorecard in yesterday’s trading was as mixed as a bag of nuts. While it managed to end the day with a win against the yen, Aussie, and Kiwi, it scored losses against its European counterparts and the Loonie. So what shook the dollar on the charts?

The U.S. fiscal cliff, of course!

For the most part, objecting comments from U.S. policymakers left traders confused and not knowing what to do with the dollar. House Speaker Boehner remarked that politicians aren’t making any progress on the issue. On the other hand, Senator Schumer said that developments are happening behind closed doors.

It might have not also helped the dollar that the preliminary GDP report for Q3 2012 missed expectations by 0.1% when it came in at 2.7%. The unemployment claims figure also came in slightly higher than expected at 393,000 when the consensus was at 392,000. But fret not young Padawans! Most analysts say that both readings are nothing but very minor disappointments that the market could easily shrug off.

Meanwhile, October’s pending home sales report came in much higher than expected at 5.2% versus the 0.9% forecast.

For today’s trading, make sure you keep an ear out on updates regarding the fiscal cliff. I wouldn’t be surprised if we continue to hear more conflicting comments and you shouldn’t be either. Just keep in mind that, when things get confusing, it’s okay not to have a position. As market junkies always say, “When in doubt, stay out!”

You can also opt to trade the news. At 1:30 pm GMT, the core PCE index for October will be on tap. Rumored to be the Fed’s preferred measure of inflation, the figure is anticipated at 0.2%. Then at 2:45 pm GMT, the Chicago PMI is seen to print an expansion for November at 50.7.

Better-than-expected figures may just give a dollar a boost, so make sure you keep tabs on them!

917

The dollar seemed as lost as Alice in Wonderland in Friday’s trading. It managed to land itself in the bulls’ turf against the pound, yen, and the comdolls, however, it finished the week in the bear lair against the euro and Swiss franc.

With U.S. policymakers still confusing markets with their comments on the fiscal cliff, I guess the dollar’s directionless price action isn’t that much of a surprise. A number of politicians spoke about the issue including President Obama. But sadly, none of them really provided any good news. For the most part, Democrats and Republicans are still pointing fingers at each other, sparking a general consensus among market participants that a deal won’t be reached anytime soon.

As for economic data, traders found very little reason in Friday’s roster to buy up the dollar. The core PCE index for October came in lower than the expected 0.2% reading at 0.1%. Meanwhile, personal spending for the month contracted by 0.2% and disappointed forecasts which was for an increase of 0.1%.

This week will be an exciting one in terms of economic data with reports from the ISM as well as the always much-anticipated NFP report on tap. Will they be able to provide the dollar with its much-needed boost? We’ll have to tune in to BabyPips.com’s forex calendar to find out, starting with the ISM manufacturing report due later at 3:00 pm GMT and seen to come in at 51.5. Be sure you don’t miss it!

918

How’s that for tripping at the starting line! The dollar began the week with a very disappointing performance, as it lost ground to both the euro and the yen. While EUR/USD climbed 82 pips to 1.3058, USD/JPY found itself sliding down 17 pips to 82.23. Can we expect more of the same today?

Sadly, the only news we got from the U.S. yesterday was BAD news. According to the ISM manufacturing PMI, November was a horrible month for the manufacturing industry! The index slipped from 51.7 to 49.5 last month (versus forecasts that called for a reading of 51.5), as weak overseas demand, a decline in investment, and orders growth slowed. What a headache!

No major reports from the U.S. today, but tomorrow, we’ll take a look at the ISM non-manufacturing PMI. If this report prints equally disappointing results, it could result in another dollar selloff. Don’t miss it when it comes out tomorrow at 3:00 pm GMT!

919

Fiscal cliff, oh fiscal cliff, thy problems are so unchanging… With Republicans and Democrats still unable to see eye to eye, the dollar continued to stumble in yesterday’s trading. EUR/USD finished at 1.0399, up 41 pips on the day, while AUD/USD ended 55 pips higher at 1.0473.

Republicans submitted a new proposal that would cut the deficit by 2.2 trillion USD, with a huge chunk of the cut coming from deductions in Medicare spending. Moreover, this would also increase tax revenue by 800 billion USD, without raising tax rates.

However, the deal was rejected, as critics argued that it would effectively lower tax rates for the wealthy, while continue to hurt the pockets of the middle class.

In any case, this just shows how far apart the two sides are, and it’s no wonder that some market players are skeptical that a deal can be made before the end of the year.

Looking ahead, we’ve got a couple of top-tier data headed our way during the New York session today.

First, there’s the ADP non-farm employment report. Expectations are that another 129,000 jobs were added to the economy last month. Take note that this report normally misses forecast, and that the last 5 releases have all been better than expected. With the Christmas holidays just around the corner, I wouldn’t be surprised if the report indicated actually came in higher than projected, as some companies may have started gearing up for shopping season. Watch out for the report at 1:15 pm GMT!

Later on at 3:00 pm GMT, the ISM non-manufacturing PMI will be available. My minions tell me that the index will probably come in at 53.6, just a tad below the 54.2 reading we saw last month. If the report fails to hit forecast, it might just lead to further dollar weakness in today’s trading.

920

For the first time in 6 days, the Greenback was able to post a winning day in the foreign exchange market. The U.S. dollar index that tracks the performance of the Greenback versus a basket of other major currencies jumped to 80.23 from 80.11.

Risk aversion was the primary reason behind the Greenback’s rally. In the euro zone, the Spanish bond auction failed to meet expectations as it only sold 4.3 billion EUR worth of bonds, short of the 4.5 billion EUR target. In addition, the ADP employment report only showed that only 118,000 jobs (net) were added, which was notably lower than the 129,000 forecast.

There were some good data that came out of the U.S. though. The ISM Non-Manufacturing PMI printed a reading of 54.7, slightly higher than the 53.6 consensus. Meanwhile, the report on U.S. Factory Orders showed a 0.8% increase. The market had initially predicted no increase.

Today, only the U.S. jobless claims report is scheduled to publish. It’s projected to show that 378,000 people claimed for unemployment insurance in the last week. The actual figure will come out at 1:30 pm GMT.

921

Now that’s how you make a comeback! The Greenback ended its losing streak against its European counterparts yesterday when EUR/USD plummeted by 115 pips while USD/CHF shot up by 68 pips. What gives?

It seems that the dollar bulls got a kick when the ECB’s Mario Draghi downgraded the region’s growth forecasts and talked about a possible interest rate cut. The risk aversion didn’t carry over to the comdolls though, as positive data from Australia propped up the Aussie and the Kiwi.

But it might have helped the dollar that the initial jobless claims came in at 370,000, which isn’t too far from estimates of a 378,000 reading. The Challenger job cuts limited the dollar’s gains though, as it came printed at 34.4% after showing a rate of 11.6% last month.

Will the dollar attempt a sweep against its counterparts today? The big non-farm payrolls data is scheduled to print at 2:30 pm GMT today so you better put your game faces on! Word on the hood is that the headline NFP is expected to come in less that 100,000 while the jobless rate stays at 7.9%. Lastly, the average hourly earnings is seen to tick 0.2% higher for November.

Market junkies like Forex Gump and Happy Pip have already shared their NFP trading guides so don’t even think of making excuses about not being prepared for the NFP report today!

922

Now that’s how you go into the weekend on a high note! Thanks to some positive NFP figures, the U.S. soared higher last Friday, as it picked apart its major counterparts. EUR/USD dropped 37 pips to finish at 1.2927, while GBP/USD hit as low as 1.6002 before settling at 1.6036, down 11 pips from its opening price.

The NFP report printed much better than expected, coming in at 146,000. Not only did this best the predicted 89,000 figure, but it also marked a slight improvement from the 138,000 number we saw last month. The unemployment rate also dropped to 7.7%, its lowest figure in four years! Boomshakalaka!

The only damper on the Greenback’s night was the preliminary University of Michigan consumer sentiment index, which printed a worse-than-expected reading of 74.5. It was anticipated that it would clock in at 82.4.

Word on the street is that consumers are getting more and more concerned about the fiscal cliff. To be honest, I can’t blame em’! There’s no just telling how this will all pan out!

No economic data lined up for today, so we may not see as big a moves that we saw at the end of last week. Nevertheless, make sure you keep tabs on what’s headed our way from other countries, as you never know what might set market sentiment on its way!

923

Kablam! The Greenback wasn’t able to sustain its strength yesterday as investor expectations weighed on the dollar. EUR/USD rose by 52 pips while USD/CHF fell by 40 pips. What spooked the dollar bulls anyway?

I’ll give you a clue – it’s not just about the Fiscal Cliff this time. Though investors are still gritting their teeth over the lack of progress on the issue, it seems that the markets are worried about something more immediate. More specifically, they believe that the Fed will soldier on with its QE program this month.

No data was released from the U.S. yesterday, but traders sold the Greenback in anticipation of the FOMC meeting tomorrow. Word on the hood is that the Fed will continue its asset purchases despite the recent improvements in the jobs sector. The possibility of more Greenback in the markets as well as the Fiscal Cliff frustrations motivated market players to turn to the dollar’s high-yielding counterparts.

Let’s see if the dollar can steal back some of its mojo when the U.S. trade balance data is printed at 2:30 pm GMT, followed by the IBD/TIPP economic optimism report at 4:00 pm GMT. Trade in the U.S. is expected to have deteriorated in October, but keep your eyes peeled in case it surprises to the upside!

924

Who let the dollar bears out? The Greenback had a losing day against most of its major counterparts, except for the Japanese yen, as higher-yielding currencies racked in plenty of gains yesterday. EUR/USD landed back above the 1.3000 handle as it closed at 1.3004 while GBP/USD closed above the 1.6100 mark.

Perhaps traders were already starting to price in their expectations for today’s FOMC statement. Remember that Operation Twist is set to expire at the end of this month so traders are expecting Big Ben and his men to announce something big, probably a new stimulus plan or an extension of their existing program, at 6:30 pm GMT today.

Then again, don’t forget that the U.S. Congress hasn’t quite come up with a plan for the approaching Fiscal Cliff yet, which suggests that the Fed might be feeling uneasy about doling out more stimulus. Better keep your eyes and ears peeled for Bernanke’s accompanying statement and the Fed’s economic forecasts instead!

If you’re planning to trade today’s main event, make sure you take a look at Forex Gump’s FOMC preview, too!

925

Three strikes and you’re out! For the third straight day yesterday, the safe haven Greenback found itself selling off across the board. The U.S. dollar index, which tracks the performance of the currency versus a basket of other major currencies, fell to 80.27 from 80.52.

The Greenback extended its decline due to the dovish FOMC statement. In the statement, the FOMC indicated that it has opted to keep rates unchanged and expand its quantitative easing program by 45 billion USD.

The central bank said that it will begin purchasing treasury securities starting January, and that it will use unemployment and inflation as basis for monetary policy. Rates, the bank said, would be kept at 0-0.25% as long as joblessness is above 6.5%.

Yesterday’s crazy volatility might happen again today as a number of high profile economic data scheduled for release.

At 1:30 pm GMT, the U.S. Retail Sales, Producer Price Index (PPI), and the Jobless Claims. Retail sales are projected to have risen by 0.5%, while the core version of the report is anticipated to remain flat. As for the PPI, the expectations is a 0.5% decline in the headline figure and a 0.2% gain in the core. And finally, Jobless Claims are projected to have fallen to 368,000 from 370,000.

926

The Greenback got a little bit of reprieve yesterday as it finally able to defend itself against the advances of other major currencies. For the first time in four days, the U.S. dollar index gained. It rose to 80.39 from 80.27.

Economic data from the U.S. were generally negative. For instance, the Producer Price Index report came in worse than expected. The core version printed a reading of 0.1% versus the 0.2% forecast while the headline figure showed a -0.8% versus the -0.5% consensus. In addition, the Retail Sales report showed that sales only grew 0.3%, and not 0.5% as the market had expected.

The only “good” news from the country was its weekly unemployment claims. It reported that only 343,000 people claimed for jobless insurance, and not 368,000 as initially predicted.

Today, watch out for the U.S. Consumer Price Index. It’s scheduled to publish at 1:30 pm GMT and it’s projected to show that the inflation rate turned negative in November. The market predicts that the average price of consumer goods and services fell 0.2%. The core version of the report, however, is anticipated to show a 0.2% increase.

927

The dollar better watch its step this week 'cause it looks like things are getting slippery out there! Last Friday, it slipped against its major counterparts as U.S. data supported the Fed’s easy monetary policy. EUR/USD closed at a new 7-month high at 1.3158 after climbing 82 pips.

Last Friday’s CPI report gave the Fed’s easy monetary stance a thumbs up as it printed a 0.3% decline in prices, despite forecasts that called for a 0.2% slide. So for now, it seems like inflation ain’t gonna be a problem for the central bank! Remember, the Fed has said in the past that it’ll keep interest rates at near-zero levels as long as inflation doesn’t tick over 2.5%.

Looking ahead, we’ve got a lot more reports and events to mull over, starting today. At 1:30 pm GMT, the Empire State manufacturing index will be available. Look for it to climb from -5.2 to -0.7. Then at 2:00 pm GMT, the TIC long-term purchases report will come out. It’s slated to increase from 3.3 billion USD to 24.3 billion USD.

To cap off today’s events, we have a couple of speeches from FOMC members Stein (4:00 pm GMT) and Lacker (6:00 pm GMT). Be sure to tune in when these two speak up because they might just slip and drop hints on the Fed’s future plans.

928

And the bleeding continues! Though the Greenback was able to put a cork on its losses against the euro and the franc, it still lost to the yen and the pound. Heck, GBP/USD shot up by 49 pips! Did the U.S. reports have something to do with it?

Maybe a little. The U.S. did print its weak NY manufacturing index (-8.1 vs. -0.7 expectations in December) and TIC long-term purchases (1.3B vs. 24.3B expected in October), but investors were too focused on gun control and Fiscal Cliff debates to notice.

Rumors that Obama and House speaker Boehner brought speculations that both sides might reach a compromise soon boosted the dollar enough to hold off more losses against the euro and the franc.

At 2:30 pm GMT today we’ll see the U.S. current account data for the third quarter. Analysts predict that the difference of value between imported and exported goods will be around 105 billion USD in Q3, a bit less than the 117 billion USD deficit that we saw in Q2 2012.

The NAHB housing market report is also up at 4:00 pm GMT, but like the current account data, it won’t likely move the dollar pairs much as market players are still gung ho about the Fiscal Cliff deadline. Keep your eyes peeled for any news on the issue, aight?

929

Well that was… odd. The dollar got mixed feedback from the markets yesterday, as it gained ground against the comdolls and the yen, but lost ground to the euro and the pound. What’s up with that?

It seems the markets just couldn’t make up their mind yesterday! But really, can you blame them? First off, the economic calendar was unusually light for the U.S. (only current account data was available, and it showed a deficit of 108 billion USD).

Secondly, according to U.S. Senator Bob Corker, Republicans and Democrats still have a long way to go before they reach an agreement on budget cuts and taxes. No wonder investors didn’t know where to take the dollar!

Hopefully, today’s economic reports will provide the markets with a little direction. At 1:30 pm GMT, we’ll take a look at housing starts (seen at .87 million, down from .89 million) and building permits (seen at 0.88 million, up from 0.87 million). If these reports print similar results (i.e. both better than expected or both disappointing), it could lead to a more consistent reaction to the dollar.

930

Mixed results for the dollar, which found itself trading lower versus the euro but managed to eke out wins versus the yen and Australian dollar. With traders about to get ready for the holidays next week, what could be in store for us later today?

No surprises from our economic cupboard yesterday, as housing data wasn’t too off earlier predictions. Building permits printed an annual pace of 900,000, while housing starts came in at 860,000. Early estimates were predicting figures of 880,000 and 870,000, respectively.

We could be in for a wild ride later tonight, as we’ve got a few red flags coming up.

First, weekly unemployment claims data will be available at 1:30 pm GMT. Word on the street is that the 4-week moving average may jump from 343,000 to 358,000. If it does, it would be another sign of instability in the labor market.

Later on at 3:00 pm GMT, both the existing home sales report and the Philly Fed Manufacturing Index will be released. Existing home sales are seen to have jumped from a pace of 4.79 million to 4.88 million, while the Philly Index is projected to have improved slightly from -10.7 to -2.2. If these reports come in better than expected, they may just give some much needed support for the Greenback.

931

The Greenback’s performance was as mixed as a bag of nuts yesterday as it lost ground to the pound, gained against the euro and comdolls, and ended in a stalemate against the Swissy. Will it be able to find a clearer direction today?

U.S. data came in stronger than expected yesterday as existing home sales and the Philly Fed index spelled bright prospects for the housing and manufacturing sectors. The existing home sales figure for November landed at 5.04M, higher than the estimated 4.88M reading and the previous month’s figure, which suffered a slight downward revision from 4.79M to 4.76M. Meanwhile, the Philly Fed index jumped from -10.7 back to the positive territory as it showed a reading of 8.1 for December.

The U.S. is set to print its durable goods orders data at 1:30 pm GMT… if the world doesn’t end in a few hours, that is! Just kidding! The headline figure is projected to show a 0.2% uptick while the core version could print a 0.2% decline for November, both of which would be way below the previous month’s figures. Do keep an eye out for that release as stronger than expected data could spark risk appetite!

932

With all the focus on the Fiscal Cliff these holidays, dollar trading was pretty subdued over the holidays. EUR/USD traded within a range of around 100 pips, while USD/CAD remained stuck between .9920 and .9960.

In case you were too busy playing with all the new toys you got over the break, lemme give you the quick 411 on what happened.

Earlier today, the Senate passed a bill that would increase tax rates on individuals and households earnings 400,000 USD and 450,000 USD annually, respectively. Take note that the Senate is dominated by the Democrats, so this would be just in line with the party’s strategy of generating revenues via tax increases.

But of course, the Republicans, who have a stronghold in the House, aren’t happy with this bill and are opposing it. They feel it’s too focused on revenue generation and doesn’t include enough spending cut measures.

Congress will now vote on the bill tonight and see if spending cuts amounting up to 330 billion USD can be injected in the bill before sending it back to the Senate. If this bill does get passed, it may lead to a final vote that will help Uncle Sam avoid going over the fiscal cliff!

Aside from the House vote, make sure you also keep an eye on the ISM manufacturing PMI report, which is due at 3:00 pm GMT. Expectations are that the index will print at 50.2, marking a slight improvement from the 49.5 we saw last month. Now, I ain’t too sure how big of an effect this will have on Greenback trading, but as my momma always used to say, better to be safe rather than sorry!

933

It was one of those days when everything just fell into place for the dollar. Lady Luck sided with the Greenback yesterday, allowing it to finish the day with wins against the euro, yen, and the Swiss franc.

German Chancellor Angela Merkel’s remark that the euro zone’s economic environment could be worse in 2013 helped it against the euro. Against the yen, Japanese Prime Minister Shinzo Abe’s reiteration that the government would take on efforts to weaken the currency made the dollar relatively stronger than its Asian counterpart.

Of course, the situation on the domestic front also looked peachy. A fiscal deal has been reached in the U.S. senate and economic data topped expectations. The ISM manufacturing PMI for December came in at 50.7, bouncing off its 3-year low from 49.5 in November and beating the forecast at 50.2. A deeper look at the report shows that manufacturers saw growth in exports, orders, and employment for the month.

Today will be another event-packed day for the dollar. At 1:15 pm GMT, the ADP report for December will be released and it is anticipated to print at 134,000. Then at 1:30 pm GMT, the unemployment claims report is estimated to come in at 356,000.

Finally, at 7:00 pm GMT, the minutes of the most recent FOMC meeting will be made available to the public. Remember that in December the Fed took more steps in loosening monetary policy even further. Traders will surely be on their toes for more hints regarding the central bank’s future monetary policy decisions so you shouldn’t miss it either!

934

The safe haven Greenback dominated the foreign exchange market yesterday due to the combination of strong economic data and the weak appetite for risk. The U.S. dollar index ended the day at 80.85, notably higher from its Asian session opening level at 80.31.

The ADP’s non-farm employment change came in better than expected. It showed that 215,000 jobs were created, higher than the 134,000 forecast. Meanwhile, the weekly unemployment claims failed to impress. It came in at 372,000 versus the 356,000 consensus.

The FOMC Meeting Minutes also contributed to the dollar’s rally. Apparently, there were some members who showed opposition to further asset purchases. These dissenting members said that the Fed should probably stop their expanding their balance sheet before 2013 ends.

Today will be a very big day for the Greenback as the mother lode of all economic reports is scheduled to be released. At 8:30 pm GMT, the U.S. employment report will be published. It’s expected to show that the unemployment rate remained unchanged at 7.7% and that 150,000 net jobs were created. If you’re interested in trading the report, head on over to Forex Gump’s NFP trading guide.

The ISM Non-Manufacturing PMI is also due today. It’s going to publish at 2:00 pm GMT and it is projected to print a reading of 54.2. Last month, the reading was at 54.7. A falling reading is normally considered bearish for the domestic currency because it suggests that growth in the non-manufacturing sector is declining.