Daily Economic Commentary: United States

Trading Discussion News and Economy
955

What a wacky NFP Friday for the Greenback! The dollar took a beating versus the euro, but managed to edge to new highs versus the pound and yen. Will we see more of the same for the month of February?

Nonfarm payrolls pretty much came in line with expectations, printing jobs growth of 157,000 last month. The good news was that the previous month’s release was revised higher to 196,000, up from initial number of 155,000. This marked the 5[SUP]th[/SUP] consecutive month of jobs gains of over 100,000.

The bad news though, was that the unemployment rate ticked higher from 7.8% to 7.9%. Take note that aside from inflation targeting, our homies at the Fed are also factoring the state of employment when aligning the central bank’s monetary policy. The Fed is targeting an unemployment rate of 6.5%, and if the unemployment rate continues to diverge from this figure, chances are we’ll see continuous bond purchasing and low interest rates.

In other news, the revised University of Michigan consumer sentiment and ISM manufacturing PMI reports both came in better than expected, printing scores of 73.8 and 53.1. These numbers not only beat forecast, but also marked decent improvements from the previous month’s readings. This helped give the scrilla a nice boost against the yen, pound, and comdolls.

Nothing lined up to start the week, so it’ll be interesting to see if recent price action continues to flow as it has. Just be sure to stay on your toes, as you never know what might trigger a sudden change in the currency currents!

956

“Enough is enough!” After eleven consecutive days of selling off versus the euro, the safe haven dollar finally pick itself up from its slump and post a winning day versus the euro. EUR/USD ended the day at 1.3519 yesterday, a whopping 123 pips lower from its opening price during the Tokyo session.

The euphoria surrounding the euro zone’s economic prospects took a major hit yesterday when Spanish Prime Minister Mariano Rajoy and his right Popular Party were reported to have been involved in a corruption scandal.

In addition, news polls in Italy have been reporting that former Italian Prime Minister Silvio Berlusconi’s political party was favored in the upcoming February elections. This was taken negatively by market participants as Berlusconi’s reign was heavily undermined by sex scandals.

On the economic front, the U.S. Factory Orders report was released. It showed that orders grew 1.8% in December, which was slightly lower than the projected 2.3% gain. To add to the disappointment, November’s figure was revised down to -0.3% from 0.0% too.

Today, await the result of the ISM Non-Manufacturing PMI. It’s going to publish at 3:00 pm GMT and it is predicted to print a reading of 55.2 for this month. In January, the reading was at 56.1. A falling reading is normally considered bearish for the domestic currency as it indicates that the rate of expansion of the non-manufacturing industry is slowing down.

957

With currencies moving according to country-specific factors, it’s no surprise that the dollar’s price action was as mixed as a bag of nuts. The Greenback posted gains against the yen and the pound but lost to the euro and the Loonie.

Just when we thought that the dollar was about to take back its losses from last week, risk sentiment showed improvement in the euro region. In addition, Japan’s BOJ Governor Shirakawa provided a boost to the higher-yielding currencies when he announced that he’s stepping down three weeks early, which hinted that the government would implement more stimulus programs sooner than expected.

Back in the U.S., the ISM non-manufacturing PMI printed at a slightly slower pace in January. The data came in at 55.2 after it had showed a 56.1 reading in December. The IBD/TIPP economic optimism report supported the rally in equities though, when it came in at 47.3 instead of the expected 46.1 reading.

No major US reports are scheduled for release today, so pay close attention to the potential price action drivers from the other major economies. For instance, take a close look at the German factory orders at 12:00 pm GMT today as well as the IVEY PMI data at 4:00 pm GMT.

958

Aaah! Another mixed day for the dollar. While the Greenback was able to finish the day in the green against its European and comdoll counterparts, it gave up ground against the yen. What gives?!

The lack of market-moving economic reports from the U.S. left the currency at the mercy of market sentiment. The ISM non-manufacturing report for January just came in as expected at 55.2.

Luckily for the dollar, risk appetite has somehow waned as suggested by the S&P 500 failing to make new highs. Of course, a bout of profit-taking ahead of the ECB and BOE rate decisions also helped the currency score a few wins but not against the yen. After all, USD/JPY has been printing new highs almost on a daily basis. Some pullback is only expected.

We still have nothing on deck from the U.S. today but be sure you don’t miss the rate decisions of the ECB and BOE as they could spark volatility in today’s trading!

959

What a coup for the Greenback! Thanks to relatively better-than-expected U.S. data and risk aversion across the markets, the dollar pared some of its intraweek losses against its counterparts. EUR/USD plunged by a whopping 121 pips while USD/CHF shot up by 83 pips. Booyah!

As I mentioned in my EUR piece, Draghi’s comments on the current strength on the euro weighed on the common currency. In fact, it was enough to make the bulls to sell their high yielding currencies in favor of the low-yielding dollar.

It might have also helped that U.S. data released yesterday was relatively better-than-expected. Though the initial jobless claims clocked in at 366,000 instead of 361,000, the consumer credit and quarterly labor costs exceeded expectations.

At 2:30 pm GMT today we’ll see Uncle Sam’s trade balance numbers. The U.S. trade deficit is expected to drop from 48.7 billion USD to 45.7 billion USD, but keep a close eye on the report in case it surprises to the downside. Of course, don’t forget to watch for any news that might affect risk sentiment, too!

960

When the chips are down, count on the U.S. dollar to swoop in! The Greenback recovered most of its recent losses against its rivals as higher-yielding currencies sold off. However, the U.S. dollar lost ground to the yen as USD/JPY fell back to the 92.00 area.

Only the trade balance report was released from the U.S. last Friday and the actual figure came in better than expected. The deficit for December narrowed from 48.6 billion USD to just 38.5 billion USD, reflecting a huge improvement in trade. In fact, the latest trade balance figure is its best reading since January 2010!

There are no economic reports due from the U.S. today, which suggests that country-specific factors could drive the price action of dollar pairs. The first set of U.S. economic reports due this week is the retail sales release scheduled on Wednesday. Both core and headline figures are expected to show slight upticks for January but these could be a bit weaker compared to the increases seen last December.

The next major report from the U.S. is the preliminary consumer sentiment reading from the University of Michigan, which is set for release on Friday. Confidence is expected to improve this February as the reading could climb from 71.3 to 74.6.

Remember that stronger than expected U.S. reports could provide a boost for the Greenback this week as the currency seems to be relying on fundamentals rather than risk sentiment these days. Good luck trading!

961

After last week’s strong moves, it seems that traders have chosen to take a chill pill this week. The U.S. dollar found itself directionless yesterday as it simply traded within tight ranges versus most major currencies. The U.S. dollar index ended the New York trading session at 80.78, barely changed from its opening level at 80.72.

The economic calendar as dead, too. No major data was released in both the euro zone and the U.S. while Japanese and Chinese banks were out on holiday.

Once again, the U.S. economic cupboard is clear of any tier 1 data but I think we will still see a bit of movement in the charts. In the U.K, the Consumer Price Index will be released. In the euro zone, ECB President Mario Draghi will be speaking in front of the Spanish Parliament at 3:30 pm GMT. Both these events could have an indirect effect on the U.S. dollar.

962

The Greenback got bullied by its major currency rivals during yesterday’s trading as the U.S. currency had to cough up its recent gains. USD/JPY tumbled to a low of 92.97 while EUR/USD rallied to the 1.3450 area during the New York session. What the heck happened?

As it turns out, the G7 leaders issued a statement dismissing talks of an ongoing currency war. According to one of the G7 leaders, they are keeping a very close eye on USD/JPY’s movements and that this will likely be one of the hottest topics during the upcoming G20 Summit. This prompted several traders to close out their huge USD/JPY positions, resulting in an overall dollar selloff.

Now that currency war speculations seem to be out of the way for the moment, traders could shift their attention to the upcoming data from the U.S., which is the retail sales report. Both the headline and core figures could post 0.1% upticks for January, weaker than the increases seen in December. Take note that the U.S. dollar has been reacting to fundamentals lately so a stronger than expected reading could boost the Greenback while a weaker than expected report could trigger a selloff. Stay on your toes during the actual release at 1:30 pm GMT.

963

The dollar just couldn’t decide where to go yesterday! It lost pips against the Aussie and the Loonie, gained serious ground against the pound, but only chalked up draws against the other major currencies. Which way will it go today?

Oddly enough, the dollar was unable to trade in a single direction even though the U.S. had a few noteworthy events on tap. It pretty much traded like a headless chicken, homies!

As for yesterday’s reports, the January retail sales report validated the Fed’s stance on monetary policy, showing a mere 0.1% increase. Though this was in line with expectations, it was also a big downgrade from the 0.5% surge we saw in December. From the looks of it, the 2% increase in payroll taxes were responsible for the decline.

In other news, FOMC member Bullard spoke up to deliver his fearless forecast for the year. He sees the economy picking up steam as threats to the global economy die down. But keep in mind that Bullard has always been one of the less dovish members of the FOMC, so his look-on-the-bright side outlook shouldn’t really come as a surprise.

Today we have the initial jobless claims report due at 1:30 am GMT. Survey says claims likely dropped from 366,000 to 361,000. Unless this report prints a huge surprise, I don’t see it affecting dollar price action much, so in the meantime, I suggest y’all keep track of market sentiment. Good luck and happy trading!

964

The yen and the Kiwi were the only major currencies that survived in the dollar domination that took place in the markets. EUR/USD and GBP/USD both dropped by more than 50 pips while USD/CHF shot up by 51 pips. What the heck happened?

As I mentioned before, the currencies are moving on country-specific factors. In the Greenback’s case, it helped that the initial jobless claims dropped to its second lowest since early 2008.

Today we’ll see a parade of U.S. reports starting with the New York manufacturing index at 2:30 pm GMT, followed by Treasury long-term purchases, industrial production, and preliminary consumer sentiment reports at around 3:00 to 3:55 pm GMT. The reports are expected to show weaker readings than their previous figures, but keep an eye out for any surprises!

965

The dollar had its way with the yen and the comdolls last Friday, but it just couldn’t bully around the European currencies. Which way will it go this week?

Quite a bit of unexpectedly good news from the U.S. to end the week. The Empire State manufacturing index rose from -7.8 to 10.0 in February, beating forecasts which called for a reading of -2.1. Likewise, the TIC long-term purchases report printed better-than-expected results, showing a balance of 64.2 billion USD versus the consensus forecast of 34.3 billion USD. This indicates strong interest in U.S. assets, probably because of the great rally that U.S. equities have been enjoying lately.

The preliminary University of Michigan consumer sentiment report also had good things to say about the economy, as it rose from 71.3 to 76.3 in February. Meanwhile, the capacity utilization rate clocked in higher than expected last month at 79.1%. The only downside was that industrial production took a step back as it declined 0.1% in the same month.

Today, we might not get much action as U.S. bankers will be out celebrating Presidents’ Day. But we’ve got a lot of heavy reports set to come out later this week, starting with housing starts, building permits, PPI, and FOMC meeting minutes on Wednesday.

After that, we’ll follow up with CPI, existing home sales, and the Philly Fed manufacturing index on Thursday. For more information about these potential market-movers, check out our economic calendar!

966

Except against the Canadian dollar and the pound, the dollar pretty much stayed within range against the rest of the majors. USD/CAD rose 36 pips to finish at 1.0108, while GBP/USD closed at 58 pips lower at 1.5461.

No surprise that we didn’t see much movement from the scrilla, as no data was released yesterday, and most traders were off for President’s Day.

With traders coming back from the holiday, we could see more movement in the markets. I’d watch out during the London session, as we’ve got the German ZEW economic sentiment report headed our way. Depending on the results of this report, it may lead to a breakout for EUR/USD out of its recent consolidation. Make sure you hit up my EUR commentary for what to expect from this top tier report!

967

Ooh, burn! The U.S. dollar had to give way to most of its major currency rivals during yesterday’s trading as U.S. traders returned from their holiday. EUR/USD made an upside breakout from consolidation and reached the 1.3400 mark while USD/JPY slid down to the 93.50 level.

There were no reports released by Uncle Sam during yesterday’s trading, which suggests that the Greenback’s losses against other major currencies were simply results of country-specific events. For today though, the U.S. dollar’s price action might be heavily dictated by the FOMC meeting minutes.

During their first monetary policy statement for the year, the FOMC said that they will make no monetary policy changes at the moment even though they think that economic activity has stalled. It will be interesting to see exactly how many Fed officials are extremely dovish or less dovish with their economic outlook as it could hint at how long the central bank would implement their asset purchase program.

Other U.S. reports due today are the PPI data and building permits figure. Producer prices are expected to rebound by 0.3% in January while the core version of the report could show a 0.2% uptick. Meanwhile, building permits could show a 0.92M reading for January, slightly higher than the 0.91M figure seen last December. While stronger than expected reports could provide support for the Greenback, traders could refrain from taking any huge positions prior to the release of the FOMC meeting minutes at 7:00 pm GMT.

968

What a comeback! The dollar reminded the markets who’s boss yesterday as it dominated the charts and came out on top of the pip hill. At the end of the day, it had gained 104 pips against the euro, 180 pips against the pound, and 40 pips against the yen.

The dollar was simply unstoppable yesterday and it owes it all to the FOMC meeting minutes! The report revealed that “many” FOMC members are beginning to feel uncomfortable about the costs of the Fed’s bond-buying program. In fact, some of them are even questioning its effectiveness!

From the looks of it, the Fed hasn’t changed its stance from last month, when it revealed that some members are considering ending the open-ended program sooner than initially planned. This could very well mean that the Fed may withdraw stimulus even before it hits its unemployment rate target of 6.5%! But on a more positive note, it could also mean that the Fed feels confident enough about the state of the economy to cut back on support.

Needless to say, yesterday’s hard numbers took a backseat to the FOMC meeting minutes, but they’re still worth noting. Building permits came in slightly better than expected at 930,000 (versus 920,000 forecasts). Housing starts clocked in below expectations at 890,000 (versus 930,000 forecasts). Meanwhile, PPI revealed a 0.2% increase in prices, which is just a tick below the 0.3% rise the markets had anticipated.

Later today, we’ll have more numbers to deal with as CPI will be available at 1:30 am GMT. Look for the headline figure to read 0.1% (up from 0.0%) and the core figure to read 0.2% (up from 0.1%).

Then at 3:00 am GMT, existing home sales data will be available. It’s slated to show a decrease from 4.94 million to 4.89 million. At the same time, the Philly Fed manufacturing index will be published, and survey says it’ll print a positive number, rising from -5.8 to 1.1.

With so many red flags on tap today, we could see big moves (again!), so stay on your toes, kiddos!

969

You win some, you lose some. Yeah, that pretty much describes the dollar’s performance in yesterday’s trading. While it was able to tap a one-month high against the euro at 1.3161 and extend its gains, it closed the day with losses against the yen and the Aussie.

Aside from country-specific events moving currencies, it would seem that a few traders have decided to take profits on some of their dollar longs. Does this mean we’re about to see a reversal in the dollar rally soon? Err, I doubt it.

Yesterday, FOMC voting member Bullard mentioned a plan how the Fed can slowly withdraw some of its stimulus measures, proposing that monthly purchases should be reduced by $5 billion to $10 billion. This only fuels hopes that the Fed is keen on taking a step towards a tighter monetary policy. And if you’re a School of Pipsology graduate, you know that that should be bullish for the dollar.

As for the roster of economic reports released yesterday, we saw mixed figures. The U.S. flash manufacturing PMI for February came in lower at 55.2 than the expected reading of 55.6. The Philly Fed manufacturing index also disappointed expectations when it printed at -12.5 versus the 1.1 forecast.

On the other hand, existing home sales topped expectations (4.89 million) at 4.92 million for January.

Today, our forex calendar doesn’t have any report scheduled to be released from the U.S. However, a couple of Fed officials are expected to give speeches later. At 3:30 pm GMT, FOMC member Towell will take the mic to be followed by FOMC member Tarullo at 11:30 pm GMT.

Keep an ear out for hints on the Fed’s future monetary policy decisions as they could affect the dollar in today’s trading!

970

After enjoying wild moves over the past few days, the markets took a breather and slowed things down to end the week. EUR/USD and USD/JPY hardly budged from their opening prices, as the dollar lost 10 pips against the euro and gained 30 pips against the yen. Will it shake things up again this week?

No new revelations from the U.S. last Friday, but we’ve got a lot of things to look forward to this week. We have CB consumer confidence and new home sales coming out tomorrow at 3:00 pm GMT, durable goods orders and pending home sales set for Wednesday, GDP due on Thursday, and the ISM manufacturing PMI to cap the week on Friday.

But the highlight of the week will no doubt be Bernanke’s semi-annual testimony, due tomorrow at 3:00 pm GMT. Word on the street is that he may don dovish feathers, which could dampen speculation that the Fed may end its stimulus program early and undo the dollar’s recent gains.

In any case, y’all better strap into your seats, homies, because it looks like we’ve got another wild week of trading ahead of us!

971

Although it scored losses against the yen and the pound, I think you can still say that the dollar had a good day. After all, EUR/USD managed to closed below the 1.3100 handle for the first time in 7 weeks. The dollar also scored wins against all the comdolls.

Jitters surrounding the results of the Italian elections moved the currency market yesterday. From what I’ve read, it would seem that Berlusconi has garnered enough votes that could threaten Bersani. Yikes! You can read more about it in my EUR commentary.

Today will probably be another wild day on the charts as market participants await for more updates from Italy. On top of that, Fed Reserve Chairman Ben Bernanke is scheduled to speak at 3:00 pm GMT. Be sure you don’t miss the question and answer portion when he testifies to the Senate Banking Committee. Chances are, questions regarding the bank’s future monetary policy will be asked and his answers may just dictate the dollar’s direction in today’s trading!

Economic reports will also be released from the U.S. but I think they will take a backseat to Bernanke’s testimony. But nonetheless, here they are: CB consumer confidence for February (60.8), new home sales for January (381,000), and the Richmond manufacturing index (-4). All of which are also due at 3:00 pm GMT.

972

After its spectacular performance on Monday, the safe haven Greenback surprisingly found itself relatively flat against other major currencies yesterday. The U.S. dollar index, which tracks the performance of the currency against the other majors, mainly moved within a tight horizontal range. It started the day at 82.15 and ended the day slightly higher at 82.35.

U.S. data releases were pretty impressive though. The report on new home sales for January, for instance, rose to 437,000. That’s a huge improvement from December’s 378,000 and the market’s forecast of 381,000.

The CB Consumer Confidence survey also smashed expectations as it came in with a reading of 69.6. The consensus was 60.8.

If that’s not enough, the S&P/CS Composite-20 House Price Index showed that the average selling price of houses rose 6.8%, slightly better than the 6.7% forecast the market had initially anticipated.

Today, there are a few red flags on the economic calendar. At 1:30 pm GMT, the U.S. Durable Goods Orders report will be published. It’s projected to show that headline orders dropped 4.8% while core orders rose 0.3%. Then, at 2:00 pm GMT, the report on U.S. pending home sales will be released. It’s expected to jump 1.7% after the previous month’s disappointing 4.3% decline.

973

Could this be the return of risk sentiment dominating the market place? Thanks to some positive economic data, we saw market playas move their moolah out of the Greenback and into higher yielding currencies. As a result, the dollar found itself on the losing end against the euro, pound, and the comdolls.

Headline durable goods orders actually came in slightly worse than expected, showing a decline of -5.2%, slightly more than the -4.8% expected figure. However, it seems that the markets decided to focus on the core account (which excludes automobile purchases), which showed a sharp rise of 1.9%. Early estimates were calling for a small 0.3% uptick.

Later on, we got more good news from the housing market, as pending home sales growth clocked in at 4.5%, nearly three times the anticipated 1.7% increase. This was just the latest piece of good news from the housing market and it’s starting to look like it’s finally climbing out of the gutter! Boom baby!

Even Fed head honcho Ben Bernanke sounded slightly more optimistic about the state of the economy, as he pointed to both improvements in the housing market as well as a rise in bank interest rates. He also said that while it may take some time for the Fed to hit it’s 6.0% employment target, he hinted that he hasn’t completely closed the door on cutting back asset purchases, saying that he and his policymakers will continuously review conditions to see if the Fed’s strategy is still applicable.

For today, we’ve got some second tier data headed our way starting at 1:30 pm GMT, when the second release of the GDP report (expectation of 0.5% growth) and weekly unemployment claims (361,000) are due. If the GDP report prints higher than anticipated, it may give the dollar a nice boost to start the New York session.

Later on at 2:45 pm GMT, the Chicago PMI is expected to print a score of 54.6, which would mark a slight decrease from the 55.6 we saw last month. Again, if this surprises to the upside, it may help the dollar erase some of yesterday’s losses.

Lastly, be on the watch out for any talks about the debt ceiling and the Sequester (a.k.a. spending cuts). If it appears that the government can’t get its act together, who knows what might happen to the scrilla!

974

Pretty awesome day for the dollar, as it body slammed the rest of its major counterparts. EUR/USD, NZD/USD, GBP/USD and AUD/USD all closed lower on the day. Will we see more of the same to start the month of March?

The dollar rallied despite mixed economic data, as we saw poor GDP figures but good results from weekly jobless claims and the Chicago PMI.

The preliminary GDP report indicated that the U.S. economy grew 0.1% last quarter, which was a nice change from the initial report which showed a -0.1% decline. However, this was well short of the 0.5% forecast.

Meanwhile, jobless claims fell to just 344,000, down from the 366,000 posted last week and also below the anticipated 361,000 figure. While our homies over at the Fed are indeed focusing on employment, they are more concerned about job creation and not merely less people accepting unemployment benefits. That said, this doesn’t alter the central banks’ strategy at all.

The Chicago PMI also came in with a pleasant surprise, as the index clocked in at 56.8, more than two points above the projected 54.6 figure. This means that purchasing managers from the Chicago area are slightly more optimistic about the state of business conditions right now.

However, it seems that the major theme for yesterday was risk sentiment. With lawmakers over at Washington failing to come up with a deal to avoid spending cuts, that means the sequester will kick in starting today, March 1. The good news is that the government has to give a one month notice before cutting any jobs in the public sector, so we may see a deal be made over the next month.

For today, we’ve got a couple of reports that could rock your socks during the New York session.

First up is the Core PCE price index due at 1:30 pm GMT. Take note that many experts believe that this is the key inflation gauge that the Fed keeps an eye. That means YOU should be paying attention as well! In any case, the index is projected to show inflation remains subdued at just 0.1%. A higher figure could cause market players to raise their eyebrows though, as it could give the hawks in the Fed the ammo needed to push for a withdrawal of bond purchasing.

Later on at 2:55 pm GMT, the revised University of Michigan consumer sentiment report will be made available. No changes are anticipated, so this may prove to be a non-event.

Lastly, the ISM manufacturing PMI will be released at 3:00 pm GMT. Word on the street is that the index will decrease slightly from 53.1 to 52.7. Take note though that 4 of the past 5 releases have beaten expectations, so we may see the same happen today.