Daily Economic Commentary: United States

Trading Discussion News and Economy
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Volatility was sky high for the greenback last Friday with the release of the US NFPreport. US non-farm employment change came in worse-than-expected at -85,000 versus the -3,000 estimate. The market initially sold off the dollar only to buy it up soon afterward.

Interestingly, the NFP employment result was almost in line with the ADP’s own version of employment change. Based on the ADP’s tally, 84,000 payrolls were cut in December. November’s NFP score, however, was positively revised to 4,000 from -11,000. But despite the unexpected drop in payrolls, the US jobless rate remained flat at 10%.

The week will kick off with the release of US’s trade balance tomorrow (January 12). According to the market’s consensus, US’s trade deficit probably expanded to $34.9 billion in November from $32.9 billion.

On January 13, The Fed’s Beige Book report and the government’s budget balance for December will be published. The government’s budget deficit in December is estimated to be at $84.9 billion, better than the $120.3 billion gap during the month prior. An $84.9 billion deficit means that the government funded the same amount of spending through borrowings. Even if the latest mark will be an improvement from the previous month, still, this places some selling pressure on the USD since an increase in the government debt effectively lessens the attractiveness of US bonds.

On January 14, data on US retail sales and unemployment claims will be issued. The headline retail sales for the month of December probably rose by 0.4% on top of the 1.3% gain in November. The core account, which excludes sales of automobiles, is expected to have posted an increase of 0.3% as well following a 1.2% rise during the previous month. The initial jobless claims for the week ending January 9, on the other hand, is projected to have risen slightly to 438,000 from 434,000 during the prior week.

To cap the week, US’s CPI for December and UoM consumer sentiment in January will be reported on the 15th. Core CPI is projected to be a tad higher at 0.1% in December after coming in flat at 0.0% in November. The headline CPI, however, is estimated to have cooled off to 0.2% from 0.4%. On a separate report, consumer sentiment likely improved to 73.7 in January from 72.5.

As you can see, the week will be very hectic in the US given the release of several top tier reports. This only means more US dollar movement, thus, more chances to profit or lose. Better be on the lookout!

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The dollar found itself on the losing end of the stick early during the Asian session yesterday as the speculation of an early rate hike from the Fed continued to fade.

The dollar’s losses were made worse when China released a report showing that their exports rose for the first time in 14 months last month. Optimism on global recovery surged on the report, giving traders more reason to let go of the low-yielding dollar in favor of higher-yielding currencies.

No important economic data from the US released yesterday but do expect to see the country’s trade balance at 1:30 pm GMT later today.

The trade balance measures the total difference in value between imported and exported goods and services in a given period. A positive balance, which is called a surplus, indicates that the total dollar value of the exports is more than the total dollar value of imports. A negative balance, on the other hand, means the opposite. The forecast for November is a deficit of $34.9 billion, up the $32.9 billion deficit the month before.

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Despite the dollar’s relative strength versus higher yielding currencies, the dollar dropped tremendously versus the yen. Could this be a signal of risk aversion creeping back into the markets?

The dollar gained when the Bank of China upped its reserve requirement. The central bank did this in hopes of slowing down growth and curbing inflation. Could this be a sign of more easing policies coming out of the Far East? My buddy Forex Gump recently wrote about this in his blog. Check it out!

Trade balance figures released yesterday indicated that the trade deficit increased from $34.9 billion to $36.4 billion in November. The data revealed however, that import demand is slowly picking up as orders for consumer and capital goods picked up. At the same time however, exports fell as demand for US consumer goods fell. Let’s see if this continues when December’s figures are released.

Meanwhile, let me remind you that it’s earnings season right now! Seeing as how companies haven’t been spitting out good earnings reports so far and coupling this with how the yen made a nice rally yesterday, could this be a case of risk aversion? Maybe, just maybe…

Nothing major on deck today except the Beige book report at 7:00 pm GMT. Many expect the report to indicate more optimism from Fed officials, while at the same time stressing that it is still too early to raise interest rates. Hmmm… not like we haven’t hear that before – ha!

Tomorrow could be pretty exciting, as retail sales data will be released at 1:30 pm GMT. Retail and core retail sales growth are expected to have cooled down a bit, posting growth of just 0.4% and 0.3% respectively, after increasing by 1.3% the previous month.

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Unable to recover its recent losses, the greenback fell against most major currencies yesterday as it failed to draw support from US economic reports. Although the Fed’s Beige Book was a bit upbeat, traders are still wary whether this optimism would carry on after today’s retail sales report.

According to the Beige Book, economic activity in the US is gradually picking up pace with ten out of twelve Fed districts posting improvements. Furthermore, December sales were reportedly higher from a year ago even though the labor market remains weak. Although current economic conditions are still a far cry from their pre-recession state, Fed officials seemed to agree that the risks of a double-dip recession are fading.

Meanwhile, the Federal budget balance came in slightly worse than expected. The deficit stood at $91.9 billion in December, down from $120.3 billion in the previous month. However, the December deficit, which was higher than the projected $88.9 billion, was nearly twice as much as the deficit from a year ago. This also marks the government’s 15th straight month in incurring a budget deficit.

Moving on… The US retail sales report is set for release at 1:30 pm GMT today. The report could show that retail sales rose by 0.4% in December, following a 1.3% jump in November. Core retail sales are hoping to see a 0.3% uptick after November’s 1.2% increase. Word on the street is that we could be in for a huge upside surprise, thanks to holiday shopping. If we do see better than expected results, the greenback could win back its losses from last week’s dismal employment report.

Also due today are this week’s unemployment claims. A total of 438K in first-time jobless claims are expected, slightly higher than the previous week’s 434K in claims. It seems the US labor market isn’t out of the rut just yet…

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Hey PipDiddy
Great job with your analysis. keep up the good work

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Oh no, not another disappointing economic report! After suffering a major letdown from the NFP report last week, the USD hit by another upsetting economic figure, the retail sales reading for December. Apparently, US consumers didn’t splurge during the holidays.

US retail sales shrank by 0.3% in December, against the consensus of a 0.4% increase. Leading the decline was the massive drop in automobile sales, which sank by 0.8%, during the month. Many also speculated that the bad weather during the last month of 2009 depressed spending, causing core retail sales to slide by 0.2%. Another possible explanation is the recently reported rise in unemployment, seen in the latest NFP figure.

On a less downbeat note, the retail sales reading for November saw an upward revision, from 1.3% to 1.8%. November core retail sales were likewise revised from 1.2% to 1.9%.

The USD was unable to make any headway as the release of the weekly jobless claims figure reawakened concerns about the state of the US labor market. Initial jobless claims came in worse than expected, posting 444K in claims for the week. All in all, these weak reports set the stage for what could be a more cautious and slightly dovish FOMC statement later this month.

Would today’s economic reports from the US allow the USD to recover? The US economic schedule is filled to the brim with reports such as the Empire State manufacturing index, CPI, industrial production, and University of Michigan consumer sentiment reading.

Inflation is expected to stay moderated for the month of December, with the CPI projected to rise by 0.2% and the core CPI estimated to climb by 0.1%. Just like my buddy Forex Gump mentioned in his US inflation article, the recent economic slack could be the reason why price levels don’t rise so much.

The industrial production report due 2:15 pm GMT could print a 0.7% uptick in December, on top of the 0.8% growth seen in November. Capacity utilization is also slated to rise from 71.3% to 71.9% during the same month.

Meanwhile, the Empire State manufacturing index is expected to show an immense improvement in the manufacturing industry, especially if the actual figure meets the consensus of an 11.2 reading for January. Later on, the release of the University of Michigan consumer sentiment reading at 2:55 pm GMT could show that consumer sentiment improved from 72.5 to 73.8 in January.

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Risk aversion, brought on by weaker-than-expected data, was able to keep the dollar well-bid last Friday. It seems that currency traders prefer the dollar as the fundamentals of major economies aren’t looking too pretty at this point in time.

The consumer price index for December showed that prices increased by 0.1% only, and not 0.2% like initially expected. The core version of the report, which excludes food and energy prices, was right in line with expectations though, revealing a 0.1% increase.

Meanwhile, the industrial production report for December printed a 0.6% uptick in December, slightly lower than the 0.7% growth consensus. November’s reading, which was at 0.8%, was revised down to 0.6%.

Lastly, the preliminary University of Michigan consumer sentiment survey, even though lower-than-expected, revealed that confidence inched up to 72.8 in January from 72.5 the month before.

US banks are closed today for the Martin Luther King holiday but looking ahead the week, we’ve got a couple of economic data of interest.

First up is November’s Treasury International Capital (TIC) flows at 2:00 pm GMT tomorrow. The Treasury International Capital flows report shows the movement of money into and out of the country for stocks and bonds. A positive TIC balance (called a surplus) means that more securities were sold than bought by the nation. Traders generally view a rising TIC balance as bullish for the domestic currency because large government holdings of a nation’s currency show confidence in that currency. The forecast is a surplus of $30.3 billion, up from the $20.7 billion surplus seen the month before.

On Wednesday, at 1:30 pm GMT, producer price index (PPI) and building permits report are due. The PPI is expected to show a rise of 0.1% in the prices of the merchandise and services sold by producers in December. Meanwhile, the annualized number of building permits issued for the same period was probably 590,000.

On Thursday, we will see the usual unemployment claims (1:30 pm GMT) and the Philadelphia manufacturing index (3:00 pm GMT). The expectation is unemployment claims for the week ending Jan. 16 eased to 441,000 from 444,000 the week before. The Philadelphia manufacturing index, on the other hand, is predicted to print a reading of 18.2 for January, slightly lower from the 20.4 reading in December.

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Pretty quiet day in the markets as the US markets were off on holiday. Most pairs stayed within range although the dollar did fall slightly across the board. Could this be a sign of more USD- selling to come?

With the US holiday (God bless you, Mr. MLK!), it pretty much a day of ranging yesterday. We could be in line for some strong moves today as US traders come back to play. Tonight, the TIC Long Term Purchases report will be released at 2:00 pm GMT. The report measures the net amount of US long term securities that were purchased by foreigners during the reported month. Traders take note of this data because it is indicative of demand for USD because in order to purchase US securities, one would first need to have US dollars.

Word on the street is that the net amount increased to $30.3 billion during December. This doesn’t really surprise me – remember that the USD had a nice rally in December, so this may be part of the reason why it did so. If this report comes in much better than forecasted, it may just remind people why they were buying the USD last December…

Tomorrow will be busy once again, as housing data (building permits and housing starts) and inflation data (producer price index) will be available at 1:30 pm GMT. Be careful trading around this time as these reports sometimes cause a ruckus in the markets as traders pay close attention to developments in these two economic indicators.

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Dollar domination! Greenback strength, which was seen all over the markets yesterday, was most likely a result of these factors: the Senate elections in Massachusetts, increased purchases of US long-term securities, and good old risk aversion.

Speculations that the Democrats could lose their 60th seat in Senate brought forth USD-buying yesterday. This is because a Republican win could delay the passing of the health care bill and other reform programs which are estimated to cost more than $1 trillion. We all know how the Obama administration has been put in the hot seat for its massive stimulus spending which resulted to a ballooning government deficit. The possibility of government spending being curtailed renewed hopes that the deteriorating fiscal situation would soon improve.

On the economic front, purchases of US long-term securities reportedly rose from $19.3 billion to $126.8 billion in November, outpacing the consensus of an increase to $30.3 billion. This is the indicator’s highest net growth since May 2007. The surge in net capital inflows reflects strong investor confidence in US securities, boosting the USD even higher.

Meanwhile, risk aversion is still a dominant theme in the markets as Greece’s credit issues threaten the stability of the entire euro zone. Investors remain hesitant to buy up higher-yielding currencies, such as the EUR.

Moving on, the US is set to release its building permits data at 1:30 pm GMT today. The report could show that building permits rose another 0.59 million in December. If the actual figure disappoints, we might see the USD return some of its gains from yesterday. Also due today is data on US housing starts, which could post a 0.58 million increase for November.

The US will also be releasing its PPI data today. Producer prices are expected to post a mere 0.1% uptick in December after rising by 1.8% in the previous month. Core PPI is estimated to climb also by 0.1%. We’ll know whether inflation would remain in check upon the release of the actual PPI figures at 1:30 pm GMT.

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The dollar is back! At least for one day, the dollar was invincible as it kicked all the other major currencies aside. It looks like things are starting to turn pretty well for the dollar bulls. Let’s see if the greenback can sustain its strong rally yesterday.

Economic data was mixed yesterday with the US’s PPI coming in at 0.2%, better than the 0.1% consensus. The core version of the account, however, fell short of the 0.1% estimate by staying flat at 0.0% during the period. US’s housing data also published some mixed results with building permits printing 650,000 in December, beating the 590,000 projection. US housing starts for the same period, though, came in slightly below the 580,000 estimate with only 560,000.

The dollar started to move higher when news came out that China ordered its banks to limit their lending. Optimism in the markets was tempered with this report, leading investors back to the safety of the greenback.

Today (1:30 pm GMT), initial jobless claims for the week ending January 16 will be released. Claims are expected to have cooled off a bit to 441,000. The count for the previous week stood at 444,000. The Philadelphia Fed manufacturing index, which is projected to fall to 18.1 from 22.5, will also be reported later during the day.

So for today, the dollar could just take a breather a trade in a range bound fashion given the expected mixed data from the US.

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Thanks to varied results on economic data, the USD traded in a mixed fashion yesterday. The USD managed to go higher against the GBP and the commodity dollars but failed to post significant gains against the EUR, CHF and JPY.

The CB leading index, which is designed to predict where the economy is headed, printed a 1.1% reading for December, slightly higher than the upwardly revised 1.0% seen the month prior. This marked the ninth straight monthly positive reading indicating that the US economy is indeed recovering. Still, the numbers showed that the pace of recovery is sluggish.

Meanwhile, the weekly unemployment claims for the week ending Nov. 16 stood at 482K, higher than the 441K claims initially expected. The worse-than-expected figure pointed to a build up of claims from the December and January holidays and not to a worsening economic situation.

Lastly, the Philadelphia manufacturing index, which sees whether conditions in the manufacturing industry are improving or not, fell to 15.2 this month. The forecast was for a reading of 18.2 while the previous month’s reading stood at 22.5 (revised up from 20.4). Digging deeper into the index revealed that new orders and shipments dropped, heading back to December levels.

No important data will be released today but it is Friday so we could possibly see the USD give up some of its gains as trader take profit and close shop before heading off to enjoy their weekend!

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Last week was great for the dollar, as it pummeled its way across the board. Is risk aversion here to stay? Or will the dollar give back its gains?

I suspect we could be in for a wild ride this week as we’ve got some key economic reports and dates coming up. First of all, our beloved Big Ben Bernanke’s term will be ending on January 31. For many, Bernanke has been credited for “saving” the US economy”. He even got on the cover of Times magazine! That must count for something right? Ha! In any case, he is up for reappointment and as early as a few weeks ago, it seemed like there was no question that the Senate would give him a second term.

Alas, things have changed and it’s not so certain anymore that he’s a shoo in. Why is this important for currency traders? Well, its for the Fed presidency! This could alter the direction that the Fed wants to take in terms of handling the economy. The appointment of a new Fed creates uncertainty in the market , which traders and investors don’t like, right? In any case, Bernanke needs 60 votes from the Senate to confirm him and the decision will be made by Tuesday – so watch out when you’re trading tomorrow!

I’ll also be waiting for the release of the FOMC statement on Wednesday. After showing an optimistic tone in November, the FOMC took a step back and went back to its “wait and see” stance last December. Given how the recent NFP report came out worse than expected, we may see more of the same sentiment in this week’s announcement.

On Thursday, durable goods orders data will be available. Durable goods are expected to have picked up by 2.1% in December. Take note that core orders are expected to show just a 0.4% increase. This means that the large increase in orders was primarily due to increased demand in big ticket items like transportation goods.

The week could end with a bang as GDP data will be available on Friday. The Advanced GDP report is expected to show that the US economy grew by 4.5% this past quarter. This would mark a nice improvement from the 2.2% growth registered during the third quarter. I’m interested to see whether or not this will provide some fuel for the dollar to continue its strong rally.

Looks like this week could be crucial for the USD. The reactions to these events may just set the tone for the next few months!

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USD price action wasn’t so turbulent yesterday since the economic calendar was free from high-impact reports. Most USD pairs consolidated throughout the day as though revving up for big moves, except for the GBPUSD which rose ahead of the UK GDP report.

Only existing home sales data was released from the US yesterday. The actual figure for December was a bit disappointing since it missed the consensus. December existing home sales came in at 5.45 million, 16.7% less than its November total of 6.54 million. This marks the biggest decline since 1968! The slump was likely a result of the housing market’s dependence on government tax credit, which is scheduled to expire soon. Nonetheless, existing home sales for 2009 rose 4.9%, chalking up its first gain in four years.

Traders are probably still sitting on the edge of their seats awaiting the US economic events this week, namely the FOMC statement and the GDP release. Politics could also play a significant role in USD price action as the confirmation of incumbent Fed Chairman Ben Bernanke’s second term in office hangs in the balance. His term is scheduled to end January 31st and today the Senate is expected to vote on whether he should step down or not. My buddy Forex Gump has a bunch of interesting thoughts on this, so I suggest you check them out here!

On the economic front, the US will release its CB consumer confidence index, S&P HPI, and Richmond manufacturing index today. The annualized housing price index, as reported by S&P, could post a 4.9% decline. This would mean that house prices in the 20 metropolitan areas included in the survey fell by 4.9% year-over-year in November. Meanwhile, consumer confidence is expected to strengthen from 52.9 to 53.6 in January. Watch out for the actual CB confidence reading at 3:00 pm GMT.

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The dollar made a Jay Leno move and stole the ‘prime time’ in yesterday’s price action. The dollar was all over the television as it stormed back into the ratings versus all of the other major currencies minus the yen.

China’s move to up the reserve requirements on some of the banks nicked the market’s optimism and caused investors to flee back to the safety of the dollar. China is the number 2 biggest economy in the world the fastest growing. Placing some contractionary measures, while preventing the country from overheating in the longer run, also stunts its growth. Being the number 2 economy, as I’ve mentioned, limiting its growth also puts a major restriction on its trading partners.

The dollar’s move was further magnified when S&P downgraded Japan’s sovereign debt to ‘negative.’

During the US session, the dollar lost some of its gains when the CB consumer confidence in January posted a better-than expected result. The index came in at 55.9, beating the 53.6 estimate. December’s score was also positively revised to 53.6 from 52.9.

Today (7:15 pm GMT), the Fed will release its decision regarding its monetary policy. Fed Chairman Bernanke and his crew are expected to maintain the bank’s interest rate at 0.25% at an ‘extended period of time’ in an effort to improve the country’s unemployment rate which currently stands at 10.0%. Presently, the central bank is already mulling on putting an interest on the banks’ excess reserves to control lending and inflation when the economy eventually picks up.

Data on new home sales for December will also be release at 3:00 pm GMT. New home sales are expected to have climbed again by 372,000 on top of November’s 355,000 count. This jump in sales could spark risk appetite to the benefit of the anti-dollars.

On a separate event, the US Senate will continue to debate on whether to confirm Fed Chairman Bernanke for another term. Bernanke needs 60 votes for his nomination to go through. Reportedly, he already has garnered 49 votes.

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hey dude, thanks for this analysis, really helpful.

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Despite the FOMC renewing its commitment to keep rates steady for an extended period of time, the dollar was able to get a one-up against most major currencies yesterday.

The dollar was able to garner some support when the FOMC came out with a relatively optimistic economic outlook. They said that economic activity has been strengthening and that business spending has been picking up. More importantly, the FOMC believes the pace of economic recovery is now “moderate”, which is an upgrade from the “weak” pace they indicated in the previous statement.

In other news, the new home sales report which was released earlier that day came in worse-than-expected, printing that the annualized number of sales fell to 342,000 in December. It was also lower from the 370,000 figure seen the month prior.

A couple of economic reports are of interest today, namely the durable goods orders and the weekly jobless claims. Both will be released at 1:30 pm GMT.

The durable goods orders report measures the monthly change of new orders received by manufacturers. The forecast is that orders in December grew by 2.1% after falling 0.7% (revised down from 0.2%) in November. Meanwhile, the core version of the report which excludes vehicle orders in its computation, is expected to print an increase of 0.4%. Items are considered durable goods if their life span exceed three years such as vehicles, computers, and appliances. An increasing durable goods orders report is usually seen as dollar-positive because it means that business activity is picking up which, in turn, could lead to economic growth.

The jobless claims report, on the other hand, is expected to show that 451,000 people claimed unemployment insurance for the week ending Nov. 23. If the actual figure comes in lower, we could see the dollar find some more buyer support.

Okay, that’s about it for today! For the moment, there seems to be a slight bias on buying dollars. Still, I’d be on the look out for any surprise news as we all know how sentiment can shift on a dime!

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Looks like the USD have been going to the gym – look at it flex its muscles! The USD once again outlifted other majors to finish ahead. Will the Advance GDP report due tonight serve as an energy bar?

US durable goods orders were released yesterday, and we were served some mixed results. First, overall durable goods orders failed to meet expectations, printing an increase of just 0.3%. It was expected that orders would rise by 2.1%. On the other hand, core durable goods – which doesnt include expensive items like airplanes – beat expectations of a 0.5% rise, as they increased by 0.9%. Perhaps that this is a sign that some industries are improving? Can we expect more of the same in coming months? Maybe, just maybe…

In other news, unemployment claims for last week were at 470,000, which was an improvement from last week, but failed to meet expectations. Jobless claims have been on a steady downtrend, indicating that the labor market is improving at a very slow pace.

Ben Bernanke got some good news (well, I would assume it would be, unless he’s sick and tired of handling this mess - ha!) yesterday, as he was reappointed as Fed Chairman for a second term. Looks like Big Ben got some fans in the Senate, as one senator even said that Bernanke was the single most important person in saving the financial system. Those are mighty words of praise if you ask me!

We should be in for some fireworks today, as GDP data will be available tonight at 1:30 pm GMT. Experts predict that the US economy grew by about 4.5% last quarter, which would be a major improvement from the 2.2% growth posted during the third quarter. What’s more, it would represent the biggest uptick in six years!

The skeptic in me isn’t quite sure if the report will meet expectations, but then again, it is the preliminary report. Even if it does post such a high figure, it could be revised down in following versions. Nevertheless, watch out for some big news as it could tip the balance further in favor of the USD if it does reach market estimates.

Aside from GDP figures, we’ve got some medium impact news on deck, with the Chicago PMI and revised University of Michigan consumer sentiment reports coming out at 2:45 pm GMT. The Chicago PMI, which measures what manufacturers in the Chicago area feel about the economy, is expected to have a reading of 57.3, down from last month’s release of 60.0. On the other hand, the consumer sentiment report is expected to print an uwpard revision from 72.8 to 73.1. Still, I think these reports will be largely ignored as traders focus in on the GDP figures.

That’s it for this week - good luck trading tonight and enjoy your weekend!

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Dollar bulls had a blast last Friday when they learned that the US economy expanded by a whopping 5.7% during the fourth quarter of 2009. However, growth for the previous quarter was revised from 3.5% down to 2.2%, raising concerns whether the fourth quarter GDP reading was too optimistic.

The staggering growth figure for the last quarter of 2009 was a result of strong growth in manufacturing as factories pumped up activity and inventories. This compensated for weak consumer spending, which was on the low end during the period.

Although the US economy posted its fastest pace of growth in almost six years, the markets seemed unimpressed. Even though the actual figure outpaced the consensus of 4.5% growth, US stocks dipped lower, suggesting that plenty are still doubtful whether this growth is sustainable. Another reason could be that many are still downbeat over the 2.4% overall contraction for 2009.

Consumer sentiment, also reported last Friday, improved from 72.8 to 74.4 in January. This was the indicator’s second monthly gain, despite prevailing weaknesses in the jobs market. This suggests that consumer spending could pick up pace soon, providing fuel for the economic recovery.

This week, the US has more top-tier reports in store. Today we’ll see the ISM manufacturing PMI at 3:00 pm GMT. The January reading could climb from 54.9 to 55.5, indicating that the industry expansion is getting stronger. Also due today are data on personal income, personal spending, and core PCE price index. Treasury Secretary Geithner is scheduled to give a speech on the fiscal 2011 budget before the House Senate Finance Committee at 3:00 pm GMT.

On Tuesday, data on pending home sales will be released. The report could show that pending home sales stayed flat in December after dropping by 16% in November.

Wednesday’s schedule includes the ADP non-farm employment change and ISM non-manufacturing PMI. The ADP report could show that net job losses amounted to 36K in December, down from the previously reported 84K in November. This could be an excellent preview for the NFP report due Friday. Meanwhile, the ISM non-manufacturing PMI could climb from 49.8 to 51.2, indicating that the industry is now expanding.

Come Thursday, we’ll see the usual weekly unemployment claims. The report could print 461K in initial jobless claims, down from last week’s 470K in claims. Lastly, on Friday, we’ll have the much-awaited non-farm payrolls report. After seeing 85K in net job losses last time, analysts are expecting a 13K increase in hiring this month. More good news for the US economy would give US dollar bulls more reason to celebrate.

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Sorry, but I am a bit confused by what you said.

Is it not true that when commodities, stocks, bonds, equities, etc. are[I] up[/I] (risk appetite), the value of the dollar goes [I]down [/I](are they not [I]inversely[/I] related?).

And when the sentiment is risk aversion, and those aforementioned markets [I]suffer[/I], would not the value of the dollar then go [I]up[/I]?

You expressed that you were surprised that the stock market did not benefit from the GDP data release. But if stocks (and the other markets) vary [B]inversely[/B] with the value of the dollar, and the dollar seems to now be benefiting again from POSITIVE U.S. news, then wouldn’t any further positive U.S. data continue to drive those markets down but increase the value of the dollar?

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Hey pkrillo,

Usually, when positive data comes out from the US, increased risk appetite encourages investors to buy up higher-yielding assets thus pushing US stocks higher. However, when the strong Q4 GDP figure was released last Friday, US stocks didn’t surge at all - in fact, they dipped lower after the release! But then, since the USD climbed higher after the report, this suggests that fundamental strength (and not risk sentiment) could’ve been the major factor driving the markets that day… which is a bit surprising since, for the past few days, the markets have been strongly affected by risk sentiment.

Hope that clears things up! Thanks for reading my posts!