Daily Economic Commentary: United States

Trading Discussion News and Economy
1015

Oh no, not again! The U.S. dollar lost further ground to its major counterparts in yesterday’s trading as U.S. data came in mostly below expectations. EUR/USD jumped up to the 1.3100 handle while USD/JPY slipped below 98.00. Will the Greenback be able to bring sexy back today?

The U.S. core PCE price index, which is the Fed’s preferred measure of inflation, fell short of the estimated 0.1% uptick and posted a flat reading instead. Personal spending showed a 0.2% increase as expected, and this was weaker than the previous 0.7% reading seen last month. Personal income, however, missed the consensus of a 0.4% increase and showed a mere 0.2% rise. This goes to show that income and spending slowed down in the U.S. economy and that this could put a drag on overall economic growth.

The good news is that pending home sales came in better than expected and showed a 1.5% increase for March, higher than the estimated 1.1% growth. However, the previous month’s figure was revised down from -0.4% to -1.1%.

For today, the main events on the U.S. schedule are the release of the CB consumer confidence index and the Chicago PMI report. Consumer confidence is projected to improve from 59.7 to 61.4 in April while the Chicago PMI could tick higher from 52.4 to 52.5. Take note that, based on recent price action, the U.S. dollar has been reacting to fundamentals. This means that weaker than expected data could trigger a dollar selloff while stronger than expected figures could give it a boost. Good luck!

1016

You’d think that the markets would finally get tired of dumping the dollar, but it seems that’s not the case! Once again, it lost a whole bunch of pips against its major counterparts as traders positioned themselves ahead of the the FOMC statement. At the end of the day, EUR/USD finished 72 pips higher at 1.3170, while USD/JPY settled at 97.49 with a 38-pip loss.

What in the world caused dollar buyers to flee late in the New York session? Well, aside from the ugly Chicago PMI report (which unexpectedly fell from 52.4 to 49.0 instead of rising to 52.5), what seems to be weighing on the dollar is the upcoming FOMC statement. Apparently, traders are betting that the Fed will stick to its guns and recommit to its QE program. Heck, some say that policymakers might even expand it!

Recall that just a few months ago, rumor had it that the Fed was considering an early withdrawal of stimulus. But with the U.S.’ recent reports signaling economic weakness, it doesn’t seem like the central bank will be tapering its bond buying soon.

In other news, the CB consumer confidence report rose more than forecast last month. The index surged to 68.1 from 61.9, amidst calls for a reading of 61.4. It seems that rising house prices played a role in the big jump in confidence. Still, this report did little to stop the dollar selloff.

Today, we have a couple more notable reports on tap. The ADP report, which has done a pretty good job of serving as a preview to NFP recently, is expected to show an increase of 154,000 jobs, down from the previous month’s 158,000. Catch it at 12:15 pm GMT.

Then at 2:00 pm GMT, we’ll take a look at the ISM manufacturing PMI, which is slated to fall from 51.3 to 51.0.

And finally, we’ll have the FOMC statement capping off our day at 6:00 pm GMT. Though the Fed isn’t expected to make any changes to monetary policy, Bernanke could deliver a few dovish remarks that might send the dollar further down the charts. Don’t miss it, folks!

1017

KABOOM! The Greenback was triple roundhouse kicked by its major counterparts yesterday after the U.S. released dollar-bearish reports. What factors came into play and how badly did the dollar suffer?

EUR/USD jumped to an intraday high of 1.3244 before it closed 74 pips higher than its open price. Even GBP/USD, USD/JPY, and USD/CHF showcased spikes that left no room of doubt as to the dollar’s weakness.

Investors just aren’t feeling the love for the U.S. economy. Yesterday’s ADP report showed that only 119,000 payrolls were added last month, which is a lot less than the 154,000 figure that many had expected. Meanwhile, the manufacturing PMI came in at 50.7, which is closer to the contractionary boundary than last month’s 51.3 reading.

The Fed sealed the dollar’s losses when they stood pat and hinted that the recent bouts of weak economic data aren’t making any difference in the Fed’s monetary policy stance. The idea that the Fed would continue its stimulus program for an unforeseeable future further weighed on the Greenback.

Let’s see if the U.S. will continue to post weak employment numbers. At 11:30 am GMT we’ll see the Challenger job cuts rate, which will be followed by the initial jobless claims data at 12:30 pm GMT. The claims report will be released around the same time as the U.S. trade balance though, so watch out for extra volatility around the time of the releases.

Good luck and good trading!

1018

The dollar finally strikes back! After days and days of being at the bottom of the dog pile, the dollar made its comeback and ravaged its major counterparts. In the end, it had snatched 65 pips from the yen, while gaining 120 pips on the euro.

It looked as though the dollar was going to end the day on a low note, but then the U.S. published a couple of upbeat reports in the New York session and boosted demand for the American currency.

The U.S. trade deficit shrank at a fast pace in March, falling from 43.6 billion USD to 38.8 billion USD. Forecasts called for a deficit of 42.1 billion USD, but because of weaker imports, the trade gap narrowed more than expected.

Meanwhile, unemployment claims dropped from 342,000 to 324,000 (versus forecasts of 346,000). The question is, will this translate to a strong NFP report?

We’ll just have to wait and see! At 12:30 pm GMT, the U.S. will finally publish its much-anticipated employment stats. Survey says we’ll likely see jobs growth clock in at 146,000, which is a decent rebound from the previous month’s sorry growth of 88,000. The markets are particularly interested in this release because the Fed didn’t seem too concerned about the job market in the recently concluded FOMC meeting. If the results come in better than expected, it could prove the Fed right and extend the dollar’s rally. But if they disappoint, the dollar might find itself back at the bottom of the dog pile.

After the NFP report, we’ll take a look at the ISM non-manufacturing PMI, which is slated to fall from 54.4 to 54.1. Catch this report at 2:00 pm GMT.

1019

With risk appetite on a roll, the dollar found itself on the short end of the trading stick last Friday, as higher yielding currencies edged higher. EUR/USD finished 51 pips higher at 1.3117, while GBP/USD closed at 1.5566, 24 pips above its opening price.

The NFP report actually sparked a dollar rally following its surprisingly positive release, as the U.S. labor market added 165,000 jobs last month, after it was anticipated to have added just 146,000. Unfortunately for the USD bulls, the sentiment didn’t last, as risk appetite took over.

Why did we see a risk rally? One reason may be that with the labor market giving us at least some signs of life, it could lessen the chances that the Fed will add more monthly bond purchases to its QE program later this year.

In other news, the unemployment rate dropped from 7.6% to 7.5%, while the ISM non-manufacturing PMI us a reading of 53.1, marking a slight decrease from the 54.4 score we saw last month.

No hard data lined up for today from Uncle Sam, so it’ll be interesting to see how dollar pairs react today. Good luck trading homies!

1020

The U.S. dollar was the king of the hill once more, as the safe-haven currency regained ground against its major counterparts. EUR/USD slid back down to the 1.3050 area while GBP/USD tumbled to a low of 1.5520. Is risk aversion back in the markets?

There were no economic reports released from the U.S. in yesterday’s New York session, but a fresh set of woes from some of the major economies ushered the risk off market environment back in. For one, ECB President Draghi was quoted saying that the European central bank was ready to ease further if necessary. On top of that, Canadian Ivey PMI missed expectations and showed a huge slowdown in their manufacturing industry’s expansion.

For today, only a few medium-tier economic data are due from the U.S. and these are the consumer credit report and the IBD/TIPP economic optimism index. Consumer credit could dip from 18.1 billion USD to 16.2 billion USD in March while economic optimism could improve from 46.2 to 47.1. Weaker than expected figures could keep risk aversion in the markets so make sure you keep close tabs on other economic data as well!

1021

Mixed results for the dollar today, as it won out against the pound, Aussie, and Kiwi, but lost against the Loonie and the yen. What in the world of forex is happening?!

With no biggies coming out from Uncle Sam yesterday, dollar trading was dictated by the individual flows of other major currencies. One thing to keep in mind though is that equity markets are on a major roll right now, which indicates that confidence and sentiment is boomin’ like a Jay-Z single. If this keeps up, the dollar bulls may struggle to give the Greenback some support.

For today, we once again have no major reports headed our way from the U.S. during the New York session, so you’re best bet would be to read up on my other commentaries to find out what lies ahead, as those will most likely dictate the price action in the forex market today. Good luck trading, my young padawan forex traders!

1022

Where to, Mr. Greenback? Without any economic reports on tap, the dollar was as lost as Robopip when he first landed on planet Earth. It gave up ground to the yen, euro, and pound, but finished higher against the Kiwi and the Aussie.

For the most part, it was market sentiment that dictated the currency’s price action. The better-than-expected trade balance figures from China allowed risk appetite to pick up a bit and might have cost it a few pips from its counterparts. Data showed that the Asian country’s exports outpaced its imports by 18.2 billion USD, more than the expected reading of 15.5 billion USD.

Only the unemployment claims report, due at 12:30 pm GMT, will be on tap for the dollar today. It is expected to come in at 333,000. From what I’ve observed, it seems like this report has been affecting the dollar more and more in the past few weeks. So make sure you don’t miss it!

1023

It looks as though dollar bulls were just waiting for the right moment to strike! After putting up unimpressive performances for the past two days, the dollar struck its major counterparts to the ground with help from strong jobs data. USD/JPY broke above 100.00 as it finished the day 171 pips higher. Meanwhile, EUR/USD slipped 123 pips to 1.3032.

The markets went absolutely nuts for the initial jobless claims report yesterday, which printed a total of 323,000 claims. Take note, not only is this figure 10,000 below forecasts, but this is actually the lowest level of claims since 2008! Looks like the job market’s strong performance last month carried over into May, eh?

In any case, this sparked yesterday’s massive rally, as it suggests that the job market is finally seeing sustainable gains. The dollar’s surge then seemed to receive a boost as the 100.00 major psychological handle on USD/JPY gave way.

We ain’t getting any more hard numbers to work with today, but we will hear FOMC members Evans (12:25 pm GMT), George (6:00 pm GMT), and Fed Chairman Bernanke (1:30 pm GMT) himself speak later in the New York session. If these three deliver hawkish statements, it might just help the dollar extend its gains.

1024

The Greenback showed everyone who is boss last Friday as it was able to charge significantly versus other major currencies. The U.S. dollar index, which tracks the performance of the Greenback versus a basket of currencies, made its way to 83.63 after opening the Asian session at 83.21.

What happened? Why did the Greenback rally?

Well, it was the combination of a few things rather than a single catalyst.

For one, traders got a big boost on the news that the Fed was already drafting its plans for withdrawing monetary policy as U.S. fundamentals were starting to improve. This was seen in the most recent jobs report and the initial jobless claims data.

Second, data from the euro zone was a major disappointing, which caused traders to seek the safety of the dollar. In the euro zone, the Industrial Production report came in severely worse than expected, printing a 0.8% decline versus the 0.2% forecast.

The Greenback has a lot on its economic plate this week. I’ve listed all the big ones for this week below:

Monday

· Retail Sales (12:30 pm GMT): -0.3% forecast, -0.4% Previous
· Core Retail Sales (12:30 pm GMT)

Wednesday

· Producer Price Index (12:30 pm GMT): -0.6% forecast, -0.6% previous
· Core Producer Price Index (12:30 pm GMT): 0.2% forecast, 0.2% previous

Thursday

· Consumer Price Index (12:30 pm GMT): -0.3% forecast, -0.2% previous
· Core Consumer Price Index (12:30 pm GMT): 0.2% forecast, 0.1% previous
· Unemployment Claims (12:30 pm GMT): 332K forecast, 323K previous
· Philadelphia Manufacturing Index (2:00 pm GMT): 2.5 forecast, 1.3 previous

Friday

· Preliminary UoM Survey (1:55 pm GMT): 77.9 forecast, 76.4 previous

As you can see, there’s a plethora of market moving events lined up for this week, so we can expect a lot of volatility. With the U.S. moving in accordance with fundametals, better-than-expected results on the reports could bolster the Greenback further. Good luck trading this week folks!

1025

The dollar’s performance was as mixed as a bag of M&Ms as it printed gains against the comdolls and the pound but ended the day almost unchanged against the euro and the yen. What the heck happened to the Greenback rally?!

The dollar had more reasons to climb yesterday especially after the U.S. retail sales data came in much better than expected. Instead of the headline figure falling by 0.3% as many had predicted, it actually rose by 0.1% in April. Even the core figure didn’t disappoint with only a 0.1% slip during the same month.

The positive U.S. data fueled expectations that the Fed would soon taper off its asset purchases. Unfortunately, the Greenback’s strong drive on Monday also encouraged profit-taking from some traders after it reached new highs against its counterparts

Today we’ll only see the small business index report at 11:30 am GMT and the import prices at 12:30 pm GMT. Though both reports don’t usually cause significant price action, significant surprises could encourage more Greenback strength.

1026

Boom, baby! The dollar powered through the charts and crushed most of its major counterparts in yesterday’s trading. USD/JPY closed above 102.00 and tapped its highest level in more than 4 years while EUR/USD closed below 1.2950.

There weren’t any top-tier economic reports released from the U.S. Some say that the dollar’s hustle could be nothing more than just a delayed reaction to the positive U.S. retail sales report that we saw on Monday. If you ask me though, I think that it’s largely because of talks about the Fed taking a step back from its very loose monetary policy which is pretty divergent to what other central banks are doing.

Today, a few economic data are on tap. If they come in better than expected, we may just see the dollar extend its gains even further!

We kick things off at 12:30 pm GMT with the U.S. PPI report anticipated to come in at -0.6%. The Empire State manufacturing index will also be released at the same time and is eyed to print at 4.

A few minutes later at 1:15 pm GMT, the industrial production report is seen to clock in at -0.2%.

Finally, at 2:00 pm GMT, the NAHB housing index report is seen to come in at 43.

There ya have it! Make sure you don’t miss these reports tomorrow!

1027

Let’s give the Greenback another round of applause! For the fifth straight day, the currency ended victorious, beating the other majors in the FX market. The U.S. dollar index managed to rally to 84.30 from its opening price at 84.07.

On the economic front, the U.S. producer price index fell 0.7% in April, which was marginally weaker than the 0.6% decline initially forecasted. In contrast, the core version that excludes food and energy prices in its computation came in with a 0.1% rise, just as expected. More bad data came in the form of the Empire State Manufacturing Index. It published a negative 1.4 reading, opposite the positive 3.6 consensus. It was also a decline from last month’s 3.1.

Today, we’ve got a couple of red flags on the U.S. forex calendar. At 12:30 pm, multiple tier 1 reports will be coming out. They are as follows (forecast vs previous):

· Headline CPI (-0.3% vs. -0.2%)
· Core CPI (0.2% vs. 0.1%)
· Unemployment Claims (332K vs. 323K)
· Building Permits (940K vs. 910K)
· Housing Starts (980K vs 1.04M)

The Philadelphia Fed Manufacturing Index will also be published, but at 2:00 pm GMT. A reading of 2.5 is expected, up from the month prior’s 1.3.

Whether data comes out positive or negative, it seems that the bulls are persistent in pushing the dollar higher. Let’s see if the same happens later!

1028

Uh oh! It looks like the dollar is losing its momentum! It failed to make any significant headway against the yen and USD/JPY just finished with a measly 9-pip gain at 102.34. The daily candle on EUR/USD also closed as a doji as the pair finished 2 pips below its opening price at 1.2877.

Disappointing data from the U.S. didn’t give investors any incentive to buy the dollar. For one, the unemployment claims for last week came in higher than expected at 360,000 versus the 332,000 consensus. The headline CPI figure for April was also lower at -0.4% than the -0.3% consensus and so was the core reading at 0.1% versus the 0.2% estimate.

Meanwhile, housing starts fell short of expectations are 850,000 when it was anticipated to come in at 980,000. Lastly, the Philly Fed manufacturing index surprised to the downside when it printed at -5.2 while analysts had anticipated it at 2.5.

The only bright spot in yesterday’s roster was the building permits report for April which came in at 1.02 million versus the 940,000 forecast.

Today, only the preliminary UoM consumer sentiment report is on tap and analysts have estimated it at 77.9. If it comes in worse than expected later at 1:55 pm GMT, we could see the dollar give up more ground to its counterparts!

1029

Not so fast! Just when we thought that the dollar’s rally is about to end, Greenback buyers jumped in and pushed the currency to notable highs against its counterparts. So what exactly extended the dollar frenzy?

Well, it might have helped that University of Michigan’s preliminary consumer sentiment report showed that consumers are at their most optimistic mood in almost six years in May. The 83.7 figure is not only higher than the upwardly revised 76.4 mark, but is also a lot better than the expected 77.9 reading.

And then there are speeches made by Fed officials. Although not all of them agree that some form of scaling back in operations is in order, some officials made their point stronger than the others.

For example, John Williams, President of the Fed Reserve in San Francisco, hinted that while central bank officials would need more confirmation of the labor market’s improvement, they could start buying less assets as early as this summer. Note that the Fed currently buys around $85 billion worth of assets every month.

Will the Greenback continue to dominate its counterparts this week? We’ll hear nothing but speeches from several other FOMC members on Monday and Tuesday, but a more important speech to watch for is the one that Ben Bernanke will give in D.C. at 2:00 pm GMT on Wednesday and the FOMC minutes released 4 hours after that. Also keep your eyes on a couple of home sales data out this week as well as reports on initial jobless claims and durable goods orders.

1030

Is the party over for the dollar bulls? The Greenback failed to extend its rally yesterday after a comment from a Fed official inspired profit-taking. EUR/USD jumped by 56 pips while USD/JPY closed 80 pips lower than its open price.

The U.S. didn’t print any economic data yesterday, but Chicago Federal Reserve President Charles Evans provided enough volatility for the dollar. In his speech, he hinted that the gains in the labor market need to be sustained before the central bank even considers tapering off its asset purchases.

Will FOMC members Bullard and Dudley agree with his sentiment? Both are scheduled to make their own speeches today at around 2:00 pm GMT. Since we won’t be seeing any economic report out from Uncle Sam again today, this not-so-old man thinks that the Fed members’ speeches will be closely watched by the market geeks.

Make sure that you don’t miss these speeches!

1031

Crazy day for the scrilla yesterday, as it was simply all over the place! While it posted some decent gains versus the pound and Aussie, it stumbled against the euro and the franc. Could we see more of the same type of trading in today’s matchups?

With no hard data released yesterday, dollar flows were directed by the individual currents of other currencies. That could all change today though, as we’ve got a ton of red flags coming up the economic totem pole!

First, there’s the existing home sales report at 2:00 pm GMT. Word on the street is that the annualized pace of old homes being sold rose to 4.99 million, up from last month’s 4.92 million. This would mark another good figure for the housing market, which has been on a steady rise over the past year.

Watch out though, as Fed top gun Ben Bernankewill be speaking at the same time! He will be speaking about monetary policy and seeing how there’s been rumors of the central bank tapering off asset purchases, this could be HUGE! If he gives any indication that the Fed just ain’t read to tone down its monthly bond purchases, it could send the dollar trading much lower by the end of the day.

Later on at 6:00 pm GMT, the FOMC meeting minutes will be released. This should give us the 411 on who’s in the bear and bull camps respectively, which in turn should give us a clearer idea of how close the Fed really is to switching course.

1032

Each major currency ate up the dollar’s dust as Fed head Ben Bernanke and the FOMC meeting minutes confirmed speculations that the Fed is indeed thinking about tapering off asset purchases. EUR/USD spiked above 1.3000 only to tumble down to 1.2850. Meanwhile, USD/JPY made another run above 103.00.

Federal Reserve Chairman Ben Bernanke mentioned in his speech yesterday that the FOMC could reduce its asset purchases “in the next few meetings.” No other hints were made on when, but those words were enough for traders to buy up the dollar.

The FOMC meeting minutes pretty much revealed the same sentiment among FOMC members. The report showed that policymakers had significant discussions regarding the bank’s current monetary policy.

Both Bernanke’s speech and the FOMC meeting minutes imply one thing: the Fed is taking a step back from QE. Analysts think that as long as we don’t see any major slowdown in the economy in the second or third quarters, asset purchases would be significantly reduced within this year.

For today, only the new home sales report for April is on tap at 2:00 pm GMT and it is expected to print at 429,000. If you ask me though, remarks from Fed officials yesterday would have a bigger impact on the dollar than the report. But that’s just me.

1033

The forex world was turned upside down as traders dumped the dollar like there was no tomorrow! Despite the release of some positive economic reports, the dollar was unable to capitalize on the U.S.'s strong fundamentals. It ended 84 pips lower against the euro, while giving back 112 pips to the yen.

Has the dollar completely lost its safe haven appeal? Well, yesterday’s price action seems to suggest so. We saw a bit of risk aversion after China released a weak manufacturing PMI reading. This worked in favor of safe haven currencies such as the Swissy and the Japanese yen, but surprisingly, the dollar failed to join the party.

Have the markets grown tired of the dollar? Remember, the dollar has been on a rampage for the past few weeks. At this point in time, we have to ask ourselves whether there are enough buyers left in the market to take it any higher. The case may be that everyone who wants to buy dollars has already loaded up on long positions.

In other news, the U.S. unloaded some upbeat reports, which sort of helped it regain some of its losses later in the New York session. Initial jobless claims fell more than expected, dropping from 363,000 to just 340,000, instead of posting a decline to 347,000. So apparently, the job market is sustaining its gains!

Meanwhile, new home sales rose to 454,000 last month, just as March’s 417,000 figure was revised up to 444,000. Considering that the Fed just recently highlighted the importance of economic data to their monetary policy decisions, reports like this should be supportive of the dollar in the long run.

Looking ahead, we have durable goods orders data coming out at 12:30 pm GMT. The headline figure is expected to print a 1.6% surge, while the core figure is anticipated to show a 0.6% increase.

1034

The Greenback’s performance on Friday was as mixed as a bag of nuts, as it edged lower against the euro and yen but managed to pocket some gains against the Aussie. EUR/USD struggled to stay above the 1.2900 major psychological level while USD/JPY slid to the 101.00 area.

Mixed signals from the U.S. economy and the Fed may have been the reasons for the Greenback’s messy trading on Friday, as the durable goods orders report came in stronger than expected while some Fed officials downplayed the likelihood of a stimulus exit.

The headline durable goods orders figure showed a 3.3% jump for April, much higher than the estimated 1.6% increase, while the core version of the report printed a 1.3% uptick. These were significant rebounds over the 1.5% decline in core durable goods orders and the 6.9% drop in headline orders last March, suggesting that manufacturing production will pick up in the coming months.

However, remarks from Fed official Bullard who said that the Fed isn’t THAT close to reducing its bond purchases prevented the U.S. dollar from sustaining its strong rallies.

U.S. banks are on a holiday today, which suggests quiet trading conditions but still with the chance of sudden and volatile moves. The major reports due from the U.S. this week are the CB consumer confidence data scheduled on Tuesday and the preliminary GDP and pending home sales report set for release on Thursday. With that, make sure you keep close tabs on market sentiment when trading dollar pairs!