I trade more to compensate for the news rather than trade with the news. But, I was curious to see that an unexpected DROP in US consumer confidence strengthened the US dollar. It is supposed to have something to do with Treasurys improving, but I don’t get it. Can someone explain it to me? Thanks!
- TA side of things…USDX Divergence
Source: Cryptogon
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Gold falls…USDX rises
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Record US Treasury Auction Volume this week…started yesterday…USDX rises
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Equities fall…USDX rises
The news in regards to a drop in consumer confidence are a “non event” in comparison to the above.
Well actually in normal situations good consumer confidence numbers is good for the currency as its an indication of optimism and spending . but in times of recession it has an opposite effect .
Investors tend to buy safe haven currencies such as dollar in the times of uncertainty(Crises) and abandon high yielding assets ( stocks , commodities …) .
today the numbers of consumer confidence and Richmond Manufacturing Index was an indication that its maybe to early to think that u.s is out of recession and improvement in u.s economy maybe sluggish .
Cas,
I’m referring to a specific news event at 14:00GMT. Here are the results:
Prior Consensus Consensus Range Actual
53.1 54.0 51.0 to 55.0 47.7
So, It was forecasted to be between 51.0 and 55.0, but came in at 47.7. Immediately upon the report, GBP/USD dropped quickly. That would mean that people were getting rid of GBP and buying USD, right? Wouldn’t people want to get rid of their USD and buy other currency in this situation?
Lowy,
I think that sort of makes sense. Since people are concerned about their other investments, they turn them into straight cash investments until things improve?
Thanks to you both!
Right.
But it didn’t happend.
The opposite happend.
Besides GBP…EURO and Gold got sold as well and the USDX rose by .50 because of it.
Wouldn’t people want to get rid of their USD and buy other currency in this situation?
Obviously USD got bought… who bought them…?
Who bought all those Volumes of Bonds @FED auction today…?
Who has got the ability to create unlimited amounts of fresh cash…?
It’s the Central Banks with their Primary Dealers aka Wall Street Banks “to big to fail”. 
[B]lowy[/B]
The US hasn’t even started to feel what it is like to be in a recession. Permanent unemployment rates above 10% and stagnant wages coupled with tight credit conditions is something the US consumer needs to get used to first in order to handle it.
The average US consumer is so maxed out on credit with his ATM machine called property permanently broken…risk of under/unemployment looming large…that he needs time to adjust to the new reality.
Besides…anybody out there believing the propagande that get’s trumpeted out of Washington, FED and US economic think tanks…?
Ever cared to look at the FED Balance sheet…tax revenue forecasts and projected Budget Deficits in a contracting economic environment…?
The ones who will get out of this mess real fast are countries like Australia, Canada and Norway. Because they got a banking system that is [B]not[/B] broken.
Forgive me for being slow…I was just born this way… 
So, cas, you’re saying that “big money” was basically trying to protect the dollar in a scenario where they felt it would go the other way? and/or…
I know you’ve mentioned a lot of other factors, as well. So, although action happened at the release of this particular report, it was also based on previous data coming in from other areas that had a bigger impact that just this single report and they were likely waiting to make their purchases until this report was produced before deciding how much to buy. Does that fall in line with what you’re thinking?
I’d like to get a better grip on the fundamentals, but there’s so much to learn…sigh.
The bottom line in [I]the current cycle[/I] is that economy bad = dollar good.
There’s a lot that goes into that in terms of reduction of USD selling on the carry trade side to falling commodity prices to risk aversion driving demand for Treasuries.
it can be a simple case of risk aversion… folks are worried and they jump back to the “safety” of the USD
I agree.
This bottom line in [I]the current cycle[/I] is [B]solely[/B] based on perception I might add.
There’s a lot that goes into that in terms of reduction of USD selling on the carry trade side to falling commodity prices to risk aversion driving demand for Treasuries.
Agreed.
Question is…WHO is it that is driving “demand” for Treasuries…?
Could it be the same entity that is auctioning them…?
The evidence out there suggests this.
interesting… can icheck what they gain from this?
I am not quite getting it…your question I mean.
While it’s true the Fed is supporting the Treasury market, their purchases aren’t big enough to be the main driver at this point. Nor do they factor into action in the forex market - except in a contrary fashion where QE increases money supply (at least at the base level) and the weak dollar view. In other words, at least as the market perceives it, the Fed is working counter to the strong dollar on strong Treasuries action.
I’m starting to see this pattern lately but I really can’t figure it out. It just seems so illogical to me.
Every time there is some bad news about the US economy the dollar rises in value?
I guess for the minute rhodytrader’s statement sums it all up.
I’ll understand it all one day…
Stop trying to think in logic about data and stuff. It’s the flow of money that moves the market. Where is the money going and why? What sort of positions are being held by the big players and what will cause them to shift?
I second rhodytrader.
IMO…GU PA in the past two weeks or so is a good example to illustrate the points made here by rhodytrader.