Daily Economic Commentary: United States

Trading Discussion News and Economy
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The dollar went on a see-saw against most major currencies yesterday as economic data came out mixed. To add to the confusion, earnings from big companies like Nokia, Goldman and Sachs and Citibank came out with clashing figures.

On the positive side, the Empire State manufacturing index for October showed that the manufacturing industry in the New York state is improving for the third straight month. It printed a 34.6 figure, almost double the 18.2 forecast. A reading above baseline zero means conditions are improving. This is its highest reading in five months, adding more evidence that recovery is underway.

Meanwhile, the core CPI, the country’s primary measure of inflation, reported that the average level of prices purchased by consumers (excluding food and energy) increased by a mere 0.2%. Still, it was higher than the 0.1% forecast.

The weekly unemployment claims also came out better than expectations. Instead of 524,000, the report only printed that 514,000 people claimed for jobless insurance last week.

The Philadelphia manufacturing index was less than impressive though as it printed only 11.5 and not 12.3 like initially predicted. Economists said this was merely a pullback from the September’s strong reading of 14.4.

The important report to watch out today is the Net Asset Foreign Purchases report at 1:00 pm GMT. It measures the net difference between the value of securities sold by the US to foreigners and those bought by the US from other nations. A positive number means that more securities were purchased by foreigners. A better than expected figure is usually seen as dollar positive.

The dollar has lost for almost the entire week… Perhaps it’s a time for pullback as traders close shop for the weekend?

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The dollar found some breathing room in Friday’s trading session, as it probably benefited from some profit taking to end the week, as well as some poor earnings reports from General Electric and Bank of America. Could this set the tone for some pro-USD movement this week?

A government report showed that demand for US financial assets grew in the month of August. The Net Asset Foreign Purchases report showed that foreigners bought a balance of $10.2 billion, after there was a net selling of $107.7 billion during July. This shows that there is still support for dollar despite growing concerns of US debt.

Also on Friday, the University of Michigan released the results of its latest consumer sentiment index. The results indicated that consumer sentiment fell to 69.4, after it had scored 73.5 in September. It appears that consumers are still nervous over the current state of the labor market. Why wouldn’t they be? Unemployment now stands at 9.8%, and is projected to hit 10.0% by the middle of 2010. It’s no wonder that some still remain pessimistic…

Over the weekend, we got some news that US President Barack Obama was considering all options available in order to overcome the unemployment problem. Word on the street is that Mr. President may have another economic stimulus package in the works. Others remain calm, as they point to the fact that only half of the current $787 billion stimulus package has been spent.

Busy week for the US, as a slew of economic reports will be released throughout the week. We start off today with US Fed Chairman Ben Bernanke talking at the Asia Economic Policy Conference at 3:00 pm GMT. It’ll be interesting to see what he says – I’ll be on the look out for any comments regarding Chinese policy, more specifically on the value of the yuan…

Tomorrow, we’ve got some housing data on deck, with building permits and housing starts being released at 12:30 pm GMT. The annualized rates of both new permits issued and the number of residential buildings that began construction in the past month are expected to increase.

Also, we’ve got some earnings reports from Apple and Yahoo coming in the next couple of days. Given how the markets reacted to earnings reports last Friday, if these come in worse than expected, could this signal the start of a return of risk aversion?

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The greenback showed signs of weakness yesterday as risk appetite surged on the heels of the DJIA climbing back above 10,000. Although a bit of profit-taking was seen during the Asian session, most of the major currencies resumed their rallies against the greenback during the US session.

With the absence of US economic reports yesterday, Fed Chairman Ben Bernanke’s speech and risk sentiment were the major drivers for the greenback’s price action. In his speech, Bernanke echoed the IMF’s plea to eliminate global trade imbalances by calling on the Asian nations to spend more and the US to save more. He mentioned that recalibrating global trade could also be achieved through greater exchange rate flexibility, particularly for the Asian countries.

Today we take a look at the performance of the US housing market through the building permits and housing starts data. Upbeat figures are foreseen for both reports as the government’s tax credit program for first-time home buyers should continue to fuel housing demand. Building permits are expected to be up by another 0.58 million while housing starts are projected to rise by another 0.60 million in September.

Also due today are the PPI and core PPI readings. Producer prices are expected to post a 0.1% uptick in September after rising by 1.7% in the previous month. Core PPI is also projected to rise by 0.1%. The actual figures are due 12:30 pm GMT.

Later on, FOMC member Kevin Warsh would deliver a speech at the Federal Reserve Bank of San Francisco Asia Economic Policy Conference. Although this event is slated to have a minimal impact on price action, traders watch out for his remarks which could hint at what the FOMC’s next steps would be.

Earnings reports continue to pour in today, with big companies such as Pfizer and Coca-cola scheduled to release their reports during the US session. Watch out for sudden shifts in risk sentiment!

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Yesterday was a day to celebrate for the greenback as it rebounded against most of the other majors. After declining for several days due to some positive economic and earnings reports that upped investors appetite for risk, dollar short sellers probably covered their positions and took profits.

Both headline and core PPI for the month of September came in with disappointing results. The headline PPI unexpectedly fell to -0.6% (0.1% consensus) after gaining by 1.7% in August. Similarly, the core PPI dropped to -0.1% (0.1% consensus) after advancing by 0.2% in the month prior. PPI is used as a leading indicator of future inflation since a rise in input prices is usually transferred to consumers. The surprise drop in the figures, hence, would keep the Fed at bay until demand for produce and service becomes more sustained.

On a separate report, both US housing starts and building permits came in below expectations. Housing starts for the month of September stayed flat at 590,000. It was projected to 620,000. On the other hand, the number of building permits issued during the same period slowed to 573,000, against the initial estimate of 595,000, from 580,000. The government will end its $8,000 tax credit for first-time homebuyers on Nov. 30. Perhaps this is the cause why the figures have slowed. The question now is how will the sector fare with one less subsidy?

Meanwhile, corporate giants like Apple, Texas Instruments, Caterpillar, Pfizer, and UnitedHealth all posted very encouraging earnings results. These positive results, however, were not enough to keep the broad market from the red zone. The somewhat bearish sentiment due to the economic updates plus the rebound in the USD kept the equities markets from rising.

Later today, the Fed will publish its beige book. The book contains an analysis on the economy that the FOMC use to help make their next decision on interest rates. Several earnings reports from companies like Wells Fargo are also scheduled for release.

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As expected, the dollar sold-off like hotcakes yesterday as companies printed that earnings came in significantly better than expected. The furious selling frenzy pushed the dollar once again to new yearly lows against the high-yielders.

The Fed’s Beige Book released yesterday pushed investors’ appetite for risk even further. It said that the banks in the US are starting to stabilize and improve modestly. However, the report also indicated that spending remains subdued since companies remain reluctant to hire.

On today’s economic calendar we have the usual weekly unemployment claims at 12:30 pm GMT. The estimate is that another 516,000 people claimed for unemployment insurance for the first time last week. Although forecast is slightly higher than the previous week’s actual results, the underlying trend in unemployment claims is decreasing.

Following at 2:00 pm GMT are two reports: the September CB leading index and the July House Price Index (HPI). The leading index is predicted to improve to 0.9% from 0.6% while the HPI would probably show another 0.3% increase in prices.

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It appeared that the dollar was going to be up for the day, as it traded higher during the earlier sessions. However, the USD fell against other majors as risk appetite seems to have been boosted by better than expected earnings reports released in the US. With it being a Friday, could we see another run of profit taking to end the week?

Jobless claims came in slightly worse than expected, as claims rose to 531,000 last week, up from 520,00 the previous week. While the number of people collecting benefits fell, there was an increase in the number of people receiving extended benefits (those collecting from other federal and state programs). This just shows that the labor market is still shaky.

More bad news came when the housing price index revealed that housing prices fell by 0.3% in August. It was expected that housing prices rose by 0.3%. This was disappointing, as the index had been showing rising prices the prior 3 months.

There was some good news however, as the Conference Board’s leading index came in slightly better than expected, printing a 1.0% improvement in the September. This marked the 6th consecutive month that the index rose. This is another sign that recovery is slowly underway.

FOMC members Charles Evans, William Dudley and Dennis Lockhart all delivered speeches at separate events yesterday, although none of them really said anything market shaking. As usual, the Fed officials remained neutral and didn’t express any opinion as to whether they were leaning towards an expansion of monetary policy. With these FOMC officials staying quiet, we could see some noise as the Big Boss – US Fed Chairman Ben Bernanke – will be speaking later tonight at 12:30 pm GMT.

Existing home sales is also on deck at 2:00 pm GMT. While being released monthly, the data is expressed in annualized rate. It is expected that September’s data will have pushed the rate up to 5.37 million.

Last week, we saw some profit taking off the board as traders closed their books for the week. With more earnings reports coming out today, who knows what will happen!? Good luck trading and enjoy the weekend!

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The greenback ended the previous week on a strong note as it showed resilience against other major currencies. Existing home sales posted a shocking 9.4% rise, signaling that consumers are much more confident with their financial standing and economic outlook. We’ll see whether this confidence is justified by the third quarter GDP report this week.

This exciting week warms up with the consumer confidence report on Tuesday. Conference Board’s index of consumer confidence is expected to climb from 53.1 to 54.1 in October.

On Wednesday, we have data on durable goods orders and new home sales. Durable goods orders are projected to be up by 1.2% in September after sliding down by 2.6% in August. Core durable goods orders are expected to rise by 0.6%. Meanwhile, new home sales are predicted to be at 443K in in September. If the actual figures meet expectations, then we might see a run of risk appetite which could weigh the greenback down.

The much-awaited third quarter advanced GDP report is due Thursday 12:30 pm GMT. The US economy is expected to climb out of the recession in the third quarter and post 3.1% economic growth. Perhaps the government stimulus packages have already worked their magic and resulted to positive growth for the quarter. If the actual report hits the mark, then traders might turn bullish on the greenback if they expect the Fed to end their easing strategies soon.
Weekly unemployment claims are also due on Thursday and could print a total of 522K in initial claims for the week. Providing more insight on the state of the US labor market are the employment cost index and personal income reports on Friday. Chicago PMI, which could climb from 46.1 to 48.6, is also due that day.

Several US companies are scheduled to release their earnings reports over the entire week. Would these cause a strong rally in equities again and thus trigger a run of risk appetite? Be careful out there!

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The ‘green’ is indeed back at least yesterday for the USD as it staged a strong rally against most of the “anti-dollars.” Most notably, the EURUSD fell sharply to as low as 1.4845 after touching a new yearly high at 1.5063 early in the session. The fiber eventually closed at 1.4877.

The US equities markets tanked yesterday on fears that the tax subsidy given to home purchasers would be ended. Concerns about the market’s health were further intensified as speculations circulated that the Bank of America would have to offer new shares to pay back its TARP grant. As a result, demand for higher yielding assets like equities and commodities decreased which consequently lifted the greenback.

In the meantime, the CB consumer confidence for the month of October will be due today at 1:00 pm GMT. The index is seen to rise to 53.7 from 53.1. Confidence, at least for the month, could have actually risen due to the recent runs in the equities markets. These runs, of course, were fueled by the government’s tax credit for homebuyers, “cash-for-clunkers” program, and the strong third quarter earnings of US firms. An increase in the index could reflect positive on the economy but bearish for the USD at least in the short term.

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The dollar surged against most major currencies yesterday as its good old friend, risk aversion, visited the currency markets once again. Yesterday marked the second day of gains for the dollar.

The CB consumer confidence for October which was released failed to meet forecast yesterday when it printed a 47.7 figure, much lower than the 53.7 expected. It was also a significant decline from last month’s 53.4. The survey showed that the lack of jobs continue to put a serious strain on consumer confidence.

The Richmond Manufacturing Index shared the same depressing tune as it came out with a worse-than-expected figure. The index, which was seen to remain flat at 14, fell to 7 instead. This, too, helped the dollar rally against other major currencies.

The things to watch out today are the durable goods report and new home sales for the month of September (12:30 pm GMT and 2:00 pm GMT, respectively).

The prediction is that the durable goods report would show that orders increased 1.2%, up from a revised down figure of -2.6% in August. The core version of the report, which excludes transportation items such as airplanes and cars, is estimated to show a 0.6% growth. Meanwhile, new home sales for September is anticipated to hit 443,000 (annualized number), up from 429,000 in month prior. If actual results come in lower than forecast, we might see the dollar get another lift from risk aversion.

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Dolla dolla bill yo! The USD has been dominating this week, posting gains against most majors once again. The EURUSD pair fell to 1.4706, a level it hasn’t reached in two weeks.

Risk aversion was rampant yesterday, as the new home sales report came in worse than expected. The report printed that the annualized rate of new home sales was at 402,000, much worse than the expected 443,000. This was due to a 3.6% decline during the month of September and are down 7.8% from a year ago.

Also released yesterday was data on durable goods orders. Orders rose by 1.0%, which was close to expectations of 1.2% gain. Core durable goods (goods excluding transportation) however, rose by 0.9%, higher than forecast of 0.6%. It was the fourth time in six months that durable goods rose.

Still, the mixed results left traders unsure, letting dollar buying dominate the markets. The skeptic in me asks, could this just be a run of profit taking as we close out the month? Can this dollar buying be sustained? We may get a clue from tonight’s trading session, as some high impact reports are on deck.

Unemployment claims data will be released at 12:30 pm GMT. It is expected that initial jobless claims for last week will be at 522,000. Also, US Treasury Secretary Tim Geithner will be speaking about system regulation before the Financial Services Committee. Traders and investors will be on the lookout for what he may say – I suggest you do the same!

Lastly, the Advanced GDP report is due at 12:30 pm GMT. It is expected that the US economy grew by 3.2% in the last quarter. If this comes out any worse than expected, could we see the USD continue to strengthen? Take a look at my recent blog post to see my thoughts on this.

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Nice one, Uncle Sam! The US economy finally made it out of the recession as it printed a positive GDP reading for the third quarter this year. Good news for the US, not so good news for the USD. As investors craved more risk, the USD fell against most majors except for the JPY.

The US economy grew at an annualized 3.5% in the third quarter, marking its first quarter in positive economic growth for more than a year. The actual figure even beat the consensus of 3.2% GDP growth as it made a strong rebound over the second quarter’s 0.7% contraction. Government stimulus policies, such as the “Cash for Clunkers” program and the rebates for first-time home buyers, contributed much to the expansion for the period.

Although the headline figure indicates that the US has officially climbed out of a technical recession, many still question whether this growth is sustainable. President Obama acknowledged that their economy still has a long way to go before having a full recovery. He mentioned that GDP is not the only benchmark for measuring economic health and that the US government is also working on creating jobs and encouraging business investment.

However, this week’s unemployment claims data suggests that the US labor market is still in trouble. Initial jobless claims landed at 530K this week, higher than the forecast of 522K. Still, this report was unable to dampen the strong USD selloff.

Today, a couple more employment indicators are on tap. Employment cost index and personal income figures are due 12:30 pm GMT. Along with these, data on personal spending and core PCE price index are due. Chicago PMI and University of Michigan’s index of consumer sentiment is due later on, at 1:45 pm GMT.

The employment cost index is projected to rise by another 0.4% in the third quarter while personal income is expecting a modest 0.1% uptick. Personal spending is predicted to be down by 0.4% in September after rising by 1.3% in August. Meanwhile, the Chicago PMI is expected to step up from 46.1 to 48.8 in October. Lastly, consumer sentiment is projected to rise from 69.4 to 70.1 this month.

Mostly upbeat reports seem to be on the US economic front for today. We could see a continuation of yesterday’s USD selloff as traders carry on with capitalizing on higher risk tolerance. Does this mean another bad day for the USD?

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If you’re a USD-hugger, then Friday was a day to remember for ya’. After printing a GDP growth of 3.5% just last Thursday, which of course lifted the spirits of all risk-hungry investors, the US equities markets (Dow, Nasdaq, S&P 500) all fell by more than 2.5% to close the month of October. The only thing that was green that day was the… greenback.

While the Chicago PMI (54.2 vs. 48.8) and the revised UoM consumer sentiment index (70.6 vs. 70.1) both registered some better-than-expected figures, the 0.5% drop in consumer spending brought the US capitals markets down in the red zone. The selling pressure was further intensified when CIT Group Inc., a 101-year-old commercial lender in the US, filed for bankruptcy. All the indices closed sharply lower while the USD rallied.

Later today, the ISM manufacturing PMI for October and pending home sales in September will be published. ISM’s manufacturing figure is seen to rise marginally to 50.1 from 49.5. The gain in pending home sales, on the other hand, is projected to slow to 0.2% from 6.4% due to the expiration of the government’s tax subsidy for first-time home buyers.

Several high-impact reports will be issued on November 4. On tap that day is the release of ADP’s non-farm employment change in October. Based on the initial estimates, about 188,000 additional jobs were lost in October on top of the 254,000 in September. The ISM non-manufacturing PMI, which is estimated to come in at 51.6 from 50.9, will also be released about an hour after.

The Fed’s interest rate decision, however, is the one going to take the center stage. The central bank is still expected to leave the rates unchanged at 0.25%. But with the 3.5% GDP growth in the third quarter the bank may already discuss its exit strategies.

On November 6, several high impact accounts will be reported again. The NFP employment change is seen to print a loss of -173,000 employees on top of the previous month’s -263,000 tally. Such will bring the country’s unemployment rate to 9.9% from 9.8%. Volatility is usually high during these times so be wary. A weak employment picture from these two accounts will push the broad markets lower and the dollar higher.

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The dollar lost some ground in yesterday’s trading session when better-than-expected economic reports from the US caused risk appetite to surge. Dollar sell-off proved to be short-lived, however, as it managed to retrace some of its losses when the initial selling frenzy faded out.

The ISM manufacturing PMI, a survey designed to see whether the manufacturing industry is expanding or contracting, beat expectations as it printed a strong 55.7 figure for the month of October. The estimate stood at 53.1 only. Remember that a number higher than 50.0 means that the manufacturing industry is expanding. The sudden rise in the reading was attributed mainly to the government’s “Cash-for-Clunkers” program as it was able to help stimulate demand for cars.

Meanwhile, the report on pending home sales also helped prop up risk appetite as it unexpectedly showed that sales jumped by 6.1% in September, which was significantly higher than the 0.2% anticipated.

On today’s chopping board we have the factory orders report at 3:00 pm GMT. It is expected to show that orders increased 1.1% in September, opposite the 0.8% decline seen in August. If the actual result comes out significantly higher, we might see another dollar sell-off on account of risk appetite.

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Mixed trading in yesterdays action, as the USD finished higher against the EUR and CHF, but lost out against the GBP and CAD. It seems that traders are gearing up for the FOMC statement - could we be in for some explosive moves later today?

The dollar was able to post some nice gains against the EUR, touching levels it hadn’t reached in over month, as concerns regarding the banking industry sparked risk aversion yesterday. It appears that banks are still having trouble digging out of this mess. If these concerns continue to grow, this could cause traders to lean towards risk aversion.

A report indicated yesterday that factory orders in the month of September rose by 0.9%, marking the 5th time in the last 6 months that orders have risen. Some suggest that more orders will follow, as companies are ready to replenish inventory levels that were cut down during this recession.

We could be in for a bumpy ride today, as a lot of high impact speed bumps will be coming up throughout the US session. Firstly, we’ve got the ADP non-farm employment change report at 1:15 pm GMT. The ADP is predicting that 188,000 jobs were lost in October. Take note however, that the last few months, the data has come in worse than expected, so watch out for some wild swings when the report is released.

Later at 3:00 pm GMT, the ISM non-manufacturing PMI will be available. The ISM index is expected to show further expansion in non-manufacturing industries, with a reading of 51.9 for last month. I wouldn’t be surprised if the report comes in a little better than expected – remember, the manufacturing PMI report released last Monday did come in to show a pleasant surprise.

Lastly, the US Fed will be releasing its FOMC statement and interest rate decision at 7:15 pm GMT. FOMC members have not been dropping any hints or clues as to what may possibly happen in the meeting. Many believe that the Fed will keep interest rates at low levels, despite the recent report that showed that the US economy grew by 3.5% in the past quarter. Still, we could still see the Fed take a cautionary stance and point to the continuous problems that the labor market is encountering. If the Fed talks about potential exit strategies, we could just see the USD drop as it could possibly spark some risk taking in the markets…

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With the exception of the JPY, most major currencies clobbered the USD after the release of the FOMC statement. Weak US economic data, which usually causes a USD rally from risk aversion, may have even crippled the USD.

As expected, the Fed kept rates at their current levels, noting that economic conditions hardly changed since September. The usual challenges to growth are still existent: increasing job losses, slow income growth, and tight credit conditions. However, the Fed announced that they would scale back their debt purchases from the initial $200 billion to $175 billion, reflecting the limited amount of agency debt. Just like the FOMC mentioned in their previous statements, they would also gradually slow the pace of their purchases of mortgage-backed securities until the first quarter of 2010.

Meanwhile, other economic data from the US painted a bleak picture of their economy. ISM non-manufacturing PMI dipped from 50.9 to 50.6 in October, falling short of the forecast at 51.6. Although the index is still safely above the 50.0 mark which indicates industry expansion, the unexpected decline indicates that growing job losses may still be dampening activity in the services sector.

Indeed, the US labor market is still in a rut. The ADP non-farm employment change failed to meet the consensus as it printed 203K in job lossses for October. Does this imply that tomorrow’s non-farm payroll report would also be worse than expected? Still, it’s worth noting that, based on the ADP report, the increase in unemployment has been tapering off from 532K in May to 203K five months later.

For today, we have a few more labor market indicators on tap. Data on weekly unemployment claims, which is due 1:30 pm GMT, could show 523K in jobless claims, down from last week’s 530K. Non-farm productivity for the third quarter may print a 6.2% increase in labor efficiency. Unit labor costs, on the other hand, are expected to slide down by 3.8% in the third quarter.

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Participants were particularly active in buying up the US equities markets in yesterday’s trading. Better-than-expected unemployment claims plus a strong third quarter earnings from Cisco carried the Dow and the S&P 500 by 2.08% and 1.92%, respectively. Despite these robust market performances, the USD did not weaken as much.

Cisco, which is the country’s leading supplier of networking equipment and network management for the internet, logged a very strong third quarter earnings. It also announced that it would add about $10 billion more to its $3 billion share buy-back plan. This positive corporate report carried the broader markets to one of the best daily single session advances this year.

The positive sentiment was also buoyed by a couple of good economic reports, namely the weekly unemployment claims and the third quarter non-farm productivity. Unemployment claims for the week ending October 31 fell to 512,000 from 532,000. While the initial jobless claims are still high, it is still better than the 523,000 estimate. Non-farm productivity during the third quarter also rose by 9.5% in its preliminary report, which is rosier than the 6.9% score in the previous period.

Today (1:30 pm GMT), all eyes will turn to the release of the much awaited NFP report. The change in non-farm payrolls is seen to be -173,000 in October from -263,000 logged in September. The latest forecast is the first time this year that lost jobs falls under 200,000. The unemployment rate, however, is still expected to rise to 9.9% from 9.8%.

Volatility is quite high around the time of the report so be careful.

My friend, Forex Gump, wrote a very insightful article on today’s NFP release. Check it out by clicking this link: October Jobs Fest – Time to Celebrate?

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NFP has been pretty good to me this year, always an opportunity to scalp into volatility. Not fot the faint hearted I’m afraid, but if you’re fully conscious and in total focus, you can make some quick profits here. On the whole, the USD tends to move with risk, so a good NFP figure (lower than expected) will send equities up and take the Euro, GBP, Aussie etc with it. This has not always been the case as good figures used to be good for USD. Well, market and perceptions change, and we with them (or perish). Just to remind that Canadian emplyment change is out at 12:00 GMT so watch the USD/CAD for potential scalps.

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As expected, the US employment report caused a lot of wild volatility swings in the market last Friday. Like the previous reports, however, any serious move in one direction failed to materialize. Exchange rates eventually returned close to their price levels prior the release after the initial market frenzy died down.

According to the report, joblessness in the US rose to 10.2% in October, from 9.8% in September. In addition, another 190,000 net jobs were lost indicating that hiring among business remains subdued. The only “good” news from the report was that wages employee wages grew 0.3%, higher than the 0.1% consensus. The labor market outlook is bleak, especially since hiring takes awhile to pick up even when the recession is over and a country returns to growth. As my buddy Forex Gump said in his blog, it took a more than two years after the GDP report posted growth in the last recession before employment started picking up.

We’ve got a lot of data upcoming this week but, unlike the last week, nothing fireworks worthy. In any case, expect to see the usual unemployment claims report on Thursday, 1:30 pm GMT. The forecast is that 512,000 people claimed for jobless insurance for the first time last week. At Friday, watch out for the US trade balance at 1:30 pm GMT and the University of Michigan Consumer Sentiment Report at 2:55 pm GMT. The trade balance is predicted to show a deficit of -$32 billion in September, up from -$30.7 billion in August while the UoM Consumer Sentiment is predicted to have risen to 71.2 this month from 70.6 last month.

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The USD got off on the wrong foot yesterday, as it stumbled around in yesterday’s dance-off. The USD got left behind by all other major currencies, as traders danced to beat of “Sell the USD”!

Risk appetite ran rampant in yesterday’s trading session, as traders were more than happy to partake in some risk taking. It appears that the markets reacted favorably to the G20 statement that revealed that G20 nations would continue to provide more stimulus. The report also showed that finance leaders were not too concerned about current currency levels. This prompted a dollar sell-off. If G20 nations are promising to keep rates low and to keep providing stimulus, shouldn’t this mean a run back to risk aversion? Hmmm… It seems that the markets are really looking at fundamentals right now. If so, we could see dollar weakness for quite awhile…

Later today at 3:00 pm GMT, the IBD/ TIPP economic optimism index will be available. The index surveys consumers on current economic conditions, measuring consumer confidence using a score of 50 as the base that separates optimism from pessimism. It is projected to have a reading of 50.3, up from October’s release of 48.7.

Also, FOMC members will be speaking throughout the day. They may drop hints about current monetary policy, as well as the direction that the FOMC will be taking in terms of when to unwind economic stimulus. Just be careful as any slip up may cause a strong market reaction.

Tomorrow is Veteran’s Day in the US. People will be honoring those who have served in the US military, so we could see less liquidity in the markets.

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Fitch said that UK is most at risk of downgrade. This caused a rapid drop in GBP/USD of around 150 pips at 6:00 UK time. The price ploughed thru S1 and is now back at S1 at 6646 area. UK Trade balance out at 09:30 UK time and that should give further direction.