Daily Economic Commentary: United States

Trading Discussion News and Economy
1035

With the U.S. on a bank holiday, it’s no surprise that the dollar ended another day with mixed results against its counterparts. EUR/USD capped the day with a doji but USD/JPY fell by 22 pips and GBP/USD also slipped by 32 pips.

We didn’t see any report from Uncle Sam yesterday as U.S. traders celebrated Memorial Day. Don’t worry, the U.S. is back in business today as it’s scheduled to print the S&P house price index at 1:00 pm GMT, followed by the CB consumer confidence and Richmond manufacturing index at 2:00 pm GMT.

These consumer-related reports are expected to come in better than last month’s figures, but keep an eye on them closely just in case they show downside surprises!

1036

Let the good times roll! The dollar put up a stellar performance on the charts as it dominated its major counterparts in yesterday’s trading. Helped by a rise in 10-year bond yields and strong economic data, the dollar took EUR/USD down 71 pips to 1.2863 and USD/JPY 121 pips higher at 102.28.

With the CB consumer confidence index printing stronger-than-expected results, the markets seem more convinced than ever that the Fed will wind down its asset purchases.

Consumer confidence rose to a 5-year high as the index surged from 69.0 to 76.2, surpassing forecasts for a reading of 70.7 by a mile. Remember, consumer sentiment is a key leading indicator of consumer spending, which is arguably the backbone of the U.S. economy. So the fact that confidence is at a high is definitely good news for the U.S., homies!

Unfortunately, the Richmond manufacturing index printed an downside surprise as it only climbed from -6 to -2, instead of printing a reading of 2 as many had predicted.

No reports coming out today, but FOMC member Rosengren is set to deliver a speech at 5:00 pm GMT. If he drops hints as to when the Fed plans to taper QE, it could result in another wild swing on dollar pairs. Don’t miss it, fellas!

1037

Looks like the dollar bulls just couldn’t sustain their strong showing from Tokyo session! The dollar gave back all its gains and then some, as it slid against most of its major counterparts. What gives?

Apparently, we saw good, old-fashioned risk aversion at play, as we not only saw the dollar fall, but European and U.S. equities drop as well. One explanation could be that with equities falling, traders may have felt inclined to reverse their positions in higher-yielding assets. Keep in mind that many traders use the yen as a funding currency, and with traders closing their short yen positions, we saw a massive drop in USD/JPY, which led to the Greenback’s downfall across the board.

One reason why equities fell as because of downward revisions by the OECD. The group now believes that global growth will clock in at 3.1% in 2013 and 4% in 2014, down from initial forecasts of 3.4% and 4.2%, respectively. More specifically, U.S. growth is projected to be at 1.9% in 2013, and 2.8% in 2014. The 2013 number was revised down slightly from 2.0%. Hmmmmm… I wonder if this will give the Fed more reason to keep current QE measures in place for the meantime.

We should be in for another wild ride in the currency markets today, as we’ve got some red-flags going up the economic totem pole.

First at 12:30 pm GMT, the preliminary GDP report and weekly unemployment claims figures will be made available. Keep in mind that the preliminary report is the SECOND version of the report, and for today’s release, no changes are expected from the initial release, with GDP growth expected at 2.5%. Make sure you take a look at Forex Gump’s trading primer on the GDP report to find out how you can make some pips trading the news tonight!

As for weekly jobless claims, its projected to come in at 342,000, just slightly above last week’s four-week rolling average of 340,000. A much better-than-expected result could provide the USD bulls a spark to recuperate some of yesterday’s losses.

Later on at 2:00 pm GMT, pending home sales figures will be released, with month-on-month growth expected to ring in at 1.3%. This would be a nice follow up to the 1.5% we saw last month and would be a good sign of things to come for the housing market.

1038

The dollar bears saw more reason to attack yesterday as the release of disappointing U.S. reports weakened the factors that caused the dollar rally in the first place. The Greenback ended the day with losses against the euro, pound, yen, and the franc.

As if the weak equities markets aren’t enough to spook the dollar bulls, the U.S. reports also came in worse-than-expected. For one thing, the U.S. GDP was revised lower from 2.5% to 2.4% as weak inventory stocking and low government spending outweighed the improvements in domestic consumption.

The initial jobless claims also gave the dollar bulls the heebie-jeebies when it ticked higher from 344,000 to 354,000 last week. Last but not the least is the pending home sales data, which only showed a 0.3% growth when analysts had been expecting at least a 1.3% uptick.Will the dollar continue to unwind its gains from the past few weeks? Maybe the reports due today could give us clues.

At 12:30 pm GMT we’ll see the U.S. core PCE index, which will be released at the same time as personal spending and income reports. We know that consumption tends to be optimistic these days, so traders could look for more clues from the Chicago PMI report out at 1:45 pm GMT. Then, if those aren’t enough to influence the dollar, then we might want to wait for the revised UoM consumer sentiment report out at 1:55 pm GMT.

Make sure that you watch these reports closely to see just how much impact they have on the Greenback!

1039

Last Friday, after two consecutive days of defeat, the Greenback finally managed to stage a nice rally. The U.S. Dollar Index, which tracks the performance of the Greenback against a basket of major currencies, went to 83.76 from 83.52. Overall, however, Greenback was the biggest loser among the major currencies last week as traders attempt to decipher when the Fed will begin tightening its massive quantitative easing program.

A couple of tier 2 data reports were released last Friday like the Core PCE Price Index, the Personal Spending report, and the Chicago PMI. The Core PCE and Personal spending reports were worse than expected but the Chicago PMI smashed forecast by a huge margin. It came in at 58.7 versus the reading of 50.3.

This week will be a big one for the Greenback as a number of high profile economic reports are scheduled for release. I’ve listed them all down below (forecast vs. previous):

Monday

· ISM Manufacturing PMI: 50.6 vs. 50.7

Tuesday

· Trade Balance: -41.B USD vs. -38.8B USD

Wednesday

· ADP Non-Farm Employment Change: 171K vs. 119K
· ISM Non-Manufacturing PMI: 53.4 vs. 53.1

Thursday

· Unemployment Claims: 345K vs. 354K

Friday

· Unemployment Rate: 7.5% vs. 7.5%
· Non-farm Payrolls: 163K vs. 165K
· Average Hourly Earnings: 0.2% vs. 0.2%

A lot of red flags lined up for this week, so you better be on your toes. With how price action has been moving lately, it’s hard to say how the actual results would affect price action.

1040

Ka-pow! The Greenback got knocked out by its counterparts after a weak U.S. economic report fueled the recent dollar selloff. EUR/USD jumped by 80 pips while USD/JPY dropped to an intraday low of 98.86. What the heck happened?!

Blame the U.S. reports! With market players closely watching the U.S. reports for signs that the Fed should taper its asset purchases, it’s no surprise that they reacted strongly to yesterday’s weak ISM manufacturing PMI.

The report clocked in at 49.0, which is not only in the contractionary zone, but is also the fastest pace of decline in four years. Even construction spending numbers disappointed expectations when it showed a 0.4% growth, lower than the forecasted 1.1% increase.

At 12:30 pm GMT today we’ll see the U.S. trade balance numbers, followed by the IBD/TIPP economic optimism report at 2:00 pm GMT. Though these reports aren’t as related to the Fed’s QE decision as employment reports, traders could still look to these releases for confirmation on whether they will continue to sell the dollar. Make sure that you have your eyes peeled when these reports are released, ayt?

1041

The Greenback’s performance was as mixed as reviews for [I]The Hangover III[/I], as it managed to post some gains against the yen and commodity currencies but lost a bit of ground to the euro and pound. USD/JPY landed back above the 100.00 major psychological level, but will it stay there?

Only the trade balance report was released from the U.S. in yesterday’s trading. The report showed that the deficit widened to 40.3 billion USD, smaller than the estimated 41.1 billion USD shortfall. The previous month’s figure was revised upwards from -38.8 billion USD to -37.1 billion USD.

For today, the U.S. will release its ADP non-farm employment change report and the ISM non-manufacturing PMI. The ADP report is projected to show a 171K increase in hiring, stronger than the previous month’s 119K rise. Meanwhile, the ISM non-manufacturing PMI is estimated to improve from 53.1 to 53.4, showing that the industry’s expansion was stronger in May. However, weaker than expected data could force the Greenback to return some of its recent gains so watch out for the actual reports starting 1:15 pm GMT.

Also due today is the Fed’s Beige Book report, which should shed light on how the Federal districts are faring. If Fed officials give an upbeat assessment of their district in terms of spending and employment, the dollar could have a chance at holding on to its gains and going for more.

1042

Another day of mixed results for the dollar! While it managed to post gains against the Aussie and the Kiwi, it couldn’t exert the same dominance against its other counterparts. EUR/USD, for instance, rose 10 pips to 1.3091 after tapping a high of 1.3115, while USD/JPY finished 90 pips lower at 99.13.

It looks like weak U.S. data is starting to take its toll on the dollar. With the ADP employment report printing an increase of just 135,000 jobs (versus 171,000 forecasts), traders are starting to feel worried about the upcoming NFP results. Remember, the ADP report has done a pretty good job of predicting non-farm payrolls in the past – usually, when it comes in better than expected, the NFP does too. And when it comes in worse than expected, the NFP typically follows as well.

Surprisingly enough, the ISM non-manufacturing PMI was unable to lift the dollar into green territory, even though it rose from 53.1 to 53.7 and beat forecasts that called for a reading of 53.4. Perhaps it was because the employment component of the index declined from 52.0 to 50.1.

So far, all signs seem to be pointing at weak hiring conditions in the job market… It’s looking ominous for the NFP!

Today, we have more employment figures coming out in the New York session. At 11:30 am GMT, we’ll take a look at the challenger job cuts report. After that, at 12:30 am GMT, initial jobless claims will be available. Look for claims to drop to 345,000 from 354,000. If these two reports print downbeat results as well, I wouldn’t be surprised to see the dollar shed some more pips.

1043

Oh, the pain! The U.S. dollar extended its decline yesterday as central bank officials from the euro zone came out with a relatively brighter economic outlook. The U.S. dollar index that tracks the performance of the Greenback versus a basket of other major currencies fell from 83.05 to below the 82.00 key support level.

In the European Central Bank (ECB) interest rate decision, President Mario Draghi announced that the central bank had decided to keep rates unchanged at 0.50%. While they revised the GDP forecast to -0.6% from -0.5%, he also said that the economy should stabilize and recover in the course of the year. He also said that the central bank has raised its GDP projected in 2014 to 1.1% from 1.0%. And finally, Draghi rejected the speculation of the possibility of negative deposit rates.

On the U.S. economic front, the U.S. jobless claims came didn’t show any surprises. It came in at 346,000, a wee bit higher than the forecast of 345,000.

Today will be another big day for the Greenback as the U.S. labor report will come out. Market participants believe that the unemployment rate will remain at 7.5% and that 167,000 jobs were probably added in May. Forex Gump did an excellent trading guide for the event, so be sure to check it out!

1044

Boom, baby! There’s nothing like better-than-expected jobs data to get the dollar hustlin’! Last Friday, the currency staged a rally against most of its major counterparts. The question is, will it carry on today?

Contrary to market expectations, the NFP report for May printed a higher number than the 167,000 forecast at 175,000. Word around the hood is that most market junkies would have already been satisfied with a reading of at least 150,000. And so, the actual figure definitely brought a wave of relief!

Don’t get too excited though. You should know that the figure for April was revised down to 149,000 from 165,000 and the unemployment rate ticked higher to 7.6% from 7.5%.

No reports are due from the U.S. today so be sure to keep tabs on market sentiment! If the positive vibes from the jobs report still dominates the market’s overall mood, we could see the dollar extend its gains!

1045

With no major data out from the U.S., the dollar’s trading was as mixed as coleslaw. The Greenback posted gains against the comdolls and the yen, but experienced losses against the European currencies.

Uncle Sam didn’t release economic reports, but FOMC member James Bullard did give a speech. Apparently, he believes that low inflation levels give room for the Fed to be aggressive in its easing programs in the near future.

The U.S. economic board is once again void of any major report today so you might want to watch the other major economies for clues on the dollar’s direction. I hear that the BOJ is set to publish its interest rates today. Keep an eye on USD/JPY as it can affect how the dollar would trade against its other counterparts!

1046

When will the bleeding stop?! Once again, the dollar was punished on the charts, as it lost ground to all of its major counterparts. While it managed to hold its ground against the comdolls, it simply couldn’t compete with the pound, euro, and the yen. USD/JPY, for instance, posted its biggest drop since 2011 as it fell from 98.75 to 95.90.

With no major reports to dictate price action for the dollar, it was basically driven by sentiment towards the yen. Unfortunately, this heavily favored a selloff in USD/JPY, as the BOJ refused to take action in its monetary policy statement.

Apparently, the markets weren’t happy with the central bank’s decision to do nothing, and they took this as their cue to load up on JPY-long positions again. This caused a massive drop on USD/JPY, which spilled over onto other dollar pairs to weaken the American currency across the board.

Today, we have some minor U.S. events on tap. At 5:00 pm GMT, the U.S. will auction off its 10-year bonds. Then at 6:00 pm GMT, it’ll publish the Federal budget balance, which will give us a sneak peek as to how much the federal government earned and spent last month. Keep in mind that these aren’t normally high-impact events, so you should probably keep an eye on risk sentiment and USD/JPY if you want a better feel of where the dollar is headed today.

1047

This summer is shaping up to be a very bad one for the Greenback. Yesterday, the Greenback suffered another bitter defeat in the foreign exchange market as it lost against all the major currencies. The U.S. dollar index that measures the performance of the currency against the other majors fell to 81.44 from 81.52.

It seems that market participants are starting to realize that U.S. data looks far too varied for the Fed to tighten monetary policy. The Greenback is also taking a hit from the USD/JPY bulls as they start to unload their long-term positions.

Market sentiment was also propped up after Germany’s Finance Minister Wolfgang Schauble defended the European Central Bank (ECB)’s Outright Monetary Transactions (OMT) at a court hearing in the country’s constitutional court into the validity of the program.

Today, we’ve got a few important economic reports scheduled to be released at 12:30 pm GMT. Namely, the retail sales report and the initial jobless claims will be published. The retail sales report is anticipated to print that there was a 0.3% growth in the headline figure and a 0.4% increase in the core reading. Meanwhile, the initial jobless claims is estimated to show that 354,000 people availed for unemployment insurance last week, which was slightly higher than the 346,000 figure from the week before.

With the Greenback being pummeled heavily across the board, weaker-than-expected data could exacerbate the currency’s decline. However, if we see some positive data, the Greenback could get a little bit of reprieve and recover some of its losses. Let’s see what will happen later!

1048

Did someone forget to invite the dollar to the party? All the major currencies and even the S&P500 rallied yesterday, but the poor dollar was left to sit alone in the loser’s corner. What the heck is going on!?

Good retail sales figures helped buoy U.S. equities, as the S&P500 managed to finish in the green. Core sales rose as expected at 0.3%, while headline figures came in better than the anticipated 0.4% number, printing at 0.6%. Unfortunately though, this wasn’t enough to boost the Greenback.

So why did the dollar drop? One reason is the sharp drop in USD/JPY, which blew by the key 95.00 mark yesterday. Risk aversion is taking over the markets and it’s quite clear that investors are short covering their yen positions, which is dragging USD/JPY lower (and consequently, the dollar).

In other news, unemployment claims printed at 334,000, which both below the projected 354,000 number and last week’s release of 346,000.

For today, we’ve got a slew of second tier reports, so it’ll be interesting to see whether investors will actually pay attention to them.

First we’ve got the monthly PPI report at 12:30 pm GMT, which is expected to show that producers are only paying 0.1% more for raw materials. Keep in mind that producers normally pass on costs to consumers, but with this report expected to show a minimal increase, we shouldn’t see consumer price increase too much either.

Later on at 1:00 pm GMT, the TIC long-term purchases report is due. At last month’s release, the report showed that U.S. investors bought 13.5 billion USD worth of foreign securities more than they foreigners bought USD-denominated securities. This indicated that demand for U.S. assets is on a down trend, which will indirectly lower demand for the scrilla as well. That said, a smaller deficit (or a surprise surplus) could give the dollar a decent boost tonight.

Lastly, the preliminary University of Michigan consumer sentiment report is due at 1:55 pm GMT. Word on the street is that we can expect a slight increase from 84.5 to 84.9. Watch out though, because a worse than expected result could give incentive for the dollar bears to strike again!

1049

The Greenback moved in two distinct waves last Friday. Early in the day, the Greenback was on fire, blazing higher across most major currencies. But when the U.S. trading session rolled along, the currency totally reversed its gains and sold-off against the majors. The U.S. dollar index that tracks the performance of the Greenback versus a basket of currencies ended the day at 81.12, barely changed from its opening level at 81.20.

Data released in the U.S. were mixed. On the one hand, the Producer Price Index (PPI) came in positively and beat forecast. The headline figure was at 0.5%, which was significantly higher than the 0.1% forecast. The core version that excludes food and energy prices in its computation was at 0.1%, just as the market had expected.

On the other hand, the Preliminary University of Michigan consumer sentiment survey and the Industrial Production report failed to meet consensus. The consumer survey printed a reading of 82.7 versus the 84.9 estimate while the Industrial Production report showed a flat figure versus the 0.3% increase projected.

There are a lot of red flags on the U.S. economic cupboard this week. I’ve listed them all below:

Monday:
G8 Meetings (all day) - This will take place in Ireland and will be attended by leaders from the G8. Focus of the discussions will probably focus on Japan.

Tuesday:
Building Permits (12:30 pm GMT) - 980,000 forecast
Core CPI (12:30 pm GMT) - 0.2%
Headline CPI (12:30 pm GMT) - 0.1%

Wednesday:
FOMC Interest Rate Decision (6:00 pm GMT) - No changes to the Fed Funds Rate expected, so focus will turn to the accompanying statement and the Fed’s economic projections. Keep your ears wide open for any talk of early tapering of the central bank’s quantitative easing program.

Thursday:
Existing Home Sales (2:00 pm GMT) - 5.01 million forecast
Philly Fed Index (2:00 pm GMT) - -0.4 forecast

As you can see, we have a lot on our plate that you can trade off this week. Even though the Greenback has been selling-off in the past few days, any of the events I mentioned above could cause market sentiment to change. Be extra careful with your positions this week, as sentiment can turn on a dime!

1050

Not a bad start for the Greenback! With only a few hours left before the Fed announces its monetary policies, USD and equities traders are feeling optimistic. USD/JPY recovered by 37 pips while USD/CHF also popped up to a high of .9273 before settling at .9220.

It didn’t hurt that the U.S. economic reports scheduled yesterday printed better-than-expected. Not only did the New York manufacturing index come in at its three-month high at 7.8, but the optimism of home builders also printed a reading of 52, its highest in SEVEN years. Not bad, eh?

Today at 12:30 pm GMT Uncle Sam is set to release its inflation, building permits, and housing starts numbers. The inflation numbers aren’t expected to have significant impact on USD’s price action, but some traders might look at the housing and building numbers to see if the Fed has reason to be concerned about the economy.

1051

Except for the euro and the Swissy, the dollar dominated all of its major counterparts yesterday. Does this mean that traders are expecting the dollar to rally after today’s FOMC statement?

Yesterday’s rally certainly wasn’t caused by the U.S. economic figures that were published, because the results of these reports were pretty much in line with expectations. Building permits clocked in at 970,000, just a hair below the 980,000 forecasts. Meanwhile, headline CPI revealed a 0.1% increase in prices, as expected, just as the core CPI reading of 0.2% matched expectations. The only report that showed a major deviation from forecasts was the housing starts report, which printed an increase from 860,000 to 910,000 but fell short of the 950,000 forecast.

Today, we have the much anticipated FOMC statement on the calendar, and according to the latest edition of Piponomics, it could be explosive!

If the Fed decides to maintain its current rhetoric or perhaps talk a little bit more about the threats to the economy, the dollar could be in for another selloff, as this would imply that tapering isn’t going to happen any time soon.

On the other hand, the dollar may chalk up some serious gains if if Bernanke focuses more on improvements in the economy or if the Fed shows more willingness to wind down its asset purchases.

Of course, there’s also a slim chance that the Fed will announce tapering. Should that happen, expect to see the dollar reach for the skies!

1052

Wham, bam, thank you Mr. Bernanke, you’re the man! Thanks to some positive words by the Fed Chairman, the dollar soared up the charts and dominated the forex market. The question is, can the bulls keep this up?

As expected, the Fed didn’t make any changes to monetary policy yesterday, as they kept rates steady and maintained the current pace of monthly bond purchases. Still, the markets reacted positively to the FOMC statement, as central bankers upgraded their employment and growth forecasts. The Fed now predicts that unemployment will drop to around 7.2%-7.3% in 2013, down from the previous 7.3%-7.5% range. Meanwhile, while 2013 GDP predictions were revised down from 2.3-2.8% to 2.3%-2.6%, the central bank did increase its 2014 projections from 2.9%-3.4% to 3.0%-3.5%.

Moreover, the Fed also laid the framework for the withdrawal of stimulus measures, as Bernanke said that the Fed would begin tapering asset purchases later this year, and completely stop buying probably by mid 2014. Boo yeah, baby!

Today, we could be in for some more volatility, as we’ve got a couple of high impact reports headed our way.

First at 12:30 pm GMT, weekly unemployment claims are projected to print at 343,000. This would mark a slight increase from last week’s 334,000 reading.

Later on at 2:00 pm GMT, existing home sales and the Philly Fed Manufacturing Index will also be released. The annualized pace of existing home sales are projected to have increase from 4.97M to 5.01M last month, while the Philly index is estimated to come in at -0.6, just a shade below the 0.0 line-in-the-sand mark.

If these figures come in exceedingly higher than forecast, we can probably see another surge in the dollar!

1053

Boo yeah! The Greenback showed the major currencies who’s boss, as it chalked up back-to-back wins. USD/JPY jumped to a high of 98.28 before closing at 97.01 while EUR/USD dipped to a low of 1.3161. Will the dollar end the week on top?

U.S. data came in mostly stronger than expected yesterday, with the Philly Fed index and existing home sales beating expectations and the initial jobless claims falling short. First-time unemployment claimants were at 354K, higher than the estimated 343K and the previous 336K. Meanwhile, the Philly Fed index landed back in the positive territory at 12.5, better than the projected -0.6 reading. Existing home sales amounted to 5.18 million, much better than the estimated 5.01 million.

For today, there are absolutely no reports on the U.S. economic schedule so dollar price action could go either way! While upbeat U.S. sentiment and the Fed’s stimulus reduction plan could continue to provide support for the Greenback, bear in mind that traders might decide to book profits as the trading week comes to a close. Stay on your toes!

1054

The dollar just kept on swimming up the charts like Michael Phelps! USD/JPY bounced off 97.00 and finished the week only a few pips shy of 98.00. Meanwhile, EUR/USD was down 90 pips for the day at 1.3125.

There weren’t any reports released from the U.S. But it’s pretty clear that market participants were still high from the shift in the Fed’s rhetoric that we heard earlier on in the week. Sure, most market junkies expected to hear the central bank hint at tapering off asset purchases in the near future but no one thought that QE3 would end really soon. Now the consensus is for the Fed to start tapering as early as September.

Today, a few economic reports will be released from the U.S. Starting off with the durable goods report at 12:30 pm GMT, the headline reading is seen to come in at 3.0% while the core reading is eyed at -0.1%. Then at 1:00 pm GMT, the S&P HPI is anticipated at 10.6%.

At 2:00 pm GMT, the consumer confidence report has been estimated at 75.6 while data on new home sales is expected to print at 462,000.

Make sure you don’t miss the reports, ayt? Better than expected data could fuel the dollar’s rally!