USD Forex-Archive

Daily Economic News - Jan 13, 2008

The US dollar went on another freefall yesterday on the back of comments from Federal Reserve President Ben Bernanke which sent speculation for a 50bp rate cut at the end of the month skyrocketing and this caused investors to seek high yielding investment alternatives. Two days ago the day to day changes of 0.5% rate cut expectations was only at 66 percent but today, Fed fund futures are pricing in a 90 percent chance that the US central bank will opt for this aggressive move. Market expectations are extremely important when it comes to the Fed's interest rate decision especially when judging the recent actions of the Fed chairman Bernanke as his decisions are frequently correlated to market expectations. The outlook for growth is certainly not encouraging. In his speech on the economy, Bernanke barely touched on inflation and instead focused almost exclusively on growth. He said that the 2008 outlook has worsened housing while the deterioration in the jobs data raises the risk of softer consumer spending. Bernanke warned that they stand ready to "act in a decisive and timely manner." This warning instantly had an impact on the market as the greenback lost some major ground against the majors. However, wholesale inventories and sales were stronger than expected but they had no impact on the US dollar. Today the US trade balance and import prices will be released. Weak manufacturing PMI numbers suggest that exports could be soft, which would cause the greenback to plummet today.

Daily Economic News - Jan 10, 2008

The greenback came into Tuesday's trading day reeling from a string of unsupportive economic data. Information coming from the housing and credit markets continued to disappoint as Tuesday's Pending Home Sales numbers once again came back worse than the initial meager expectations. Pending Home Sales, which measures the signed real estate contracts for existing single-family homes, co-ops and condominiums, released down the previous 6 percentage points down from 3.7% to -2.6%, as expectations had the figure as low as at -0.7%.

If that wasn't enough to offset any dollar appreciation, Fed Presidents from both Boston and Philadelphia once again remained unclear regarding expected intervention by the Fed into the failing US economy as investors suspect interest rate cuts are still to come. Philly Fed Chair Prosser said he is "expecting slow economic growth for several quarters" and pointed out that "since monetary policy's effects on the economy occur with a lag, there is little monetary policy can do today to change economic activity in the first half of 2008."

The dollar suffered to establish any sort of rally as the Dow Jones returned another day of abysmal numbers as it fell 238 points to end NY trading. With a combination of negative data from most relevant economic sectors the "recessionary" jargon is slowly being revived once again. A lion's share of investors are still positive that the Fed will cut rates by anywhere between 50 and 125bp. Such failure by important markets leaves a burden on US consumers to hopefully revive the dollar and allow the Fed to cut by only 25bp.

As we look forward to the rest of today trading day, the economic calendar in the US will be rather empty as the only relevant event will be a speech by St. Louis Fed President William Poole, who will likely echo the same uncertainty as his Boston and Philadelphia colleagues. Look for the dollar to continue to struggle against its major currency counterparts.

Daily Economic News - Jan 9, 2008

After, a relatively intense price action for an empty US calendar yesterday, the Greenback floats around 1.4710 against the EUR and 109.40 against the JPY. There seems to be a certain consolidation for the USD after the massive drop it had after Friday's very low release of the Nonfarm payrolls, and it seems that it is now swimming in calm water before the next key event which may push the greenback further down.

As for today, there are two key events expected to come from the US, the first one will be the Philadelphia Federal Reserve President and FOMC voting member Charles Plosser's Speech about risks to the economy, inflation, and labor markets at the Main Line Chamber of Commerce, in Philadelphia. FOMC voting members are responsible for setting the nation's short term interest rate, so traders scrutinize their speeches closely for clues regarding future monetary policy. The speech might cause choppy price movement and some abnormality in the volatility.

A bit later at 15:00 GMT, Pending Home Sales is expected to be released, as most analysts are very pessimistic about that figure and it now has a consensus release of about -0.7% which is a relatively huge drop from last month's 0.6%, and might cause the Greenback to continue dropping on the local level, and might spike the next long run drop that might take the EUR/USD into the 1.4900 levels again.

As for the rest of the week the US calendar is quite light on important events except for Friday which will have the US Trade balance. Other than that, traders will focus their attention a bit more on the Euro-Zone which has the ECB and BOE rates statements, which might contribute to the USD crisis.

Daily Economic News - Jan 6, 2008

Yesterday a government report showed that the number of U.S. workers filing new claims for jobless aid dropped by 21,000 last week, while the number of Americans who stay on the benefit rolls increased to the highest level in more than two years. The U.S. Labor Department reported that the number of Americans filing for first-time claims for unemployment benefits suggested that the labor market continued to weaken since the end of 2007. Initial jobless claims decreased to 336,000 last week from a two-year high of 357,000 the week before.

Job growth slowed in December remarkably during the last four months and U.S Companies only added 40,000 jobs. The ADP report, which was published yesterday, indicated a reduction of 31,000 jobs in goods- producing industries including manufacturing and construction companies. Service providers added 71,000 workers and construction employment dropped by 17,000. This fact suggests that nonfarm payrolls grew by about 65,000, close to the 58,000 now expected. Borrowing costs have fallen since the central banks declared a shared effort to relieve a logjam in interbank lending power on the basis of concerns due to losses at financial institutions which could possibly slow economic growth. Applications for loans to buy homes fell to the lowest level in more than four years, while demand for refinancing loans dropped to the lowest since December 2006. On the basis of this data, many Forex traders believe that today's Labor Department report will also show employment slow down, and as we witness, the employment figures are vital, they represent mainly the housing sector in combination with the credit markets, from which the U.S. economy still suffers.

The sentiment surrounding the greenback remains negative so it should continue on its bearish path today, however it could consolidate after its recent sharp declines. All eyes will be on the NFP report today and we could see some sharp movement on the back of any surprise.

Daily Economic News - Jan 3, 2008

The New Year has started with a negative sentiment for the greenback which now trades at 1.4650 against the EUR and 1.9860 against the GBP. 2007 was one the worst years the greenback has ever had, as it broke negative lows one after the other, as US economy faced a state of struggle that might even bring recession in 2008 will unfold. Many changes are expected to happen in the US this year, and it could be a major turning point that could have global implications. The new president that Americans will vote in this year will most likely determine the near future of the US economy, together with a halt in the Federal Reserve's rate cut policy; it could make the difference between a healing economy and recession economy.

The three remaining trading days of this week are expected to be extremely important as the US calendar is relatively packed, and all the financial bodies are going back to normal market activities. The first event will be the ISM Manufacturing Index (15:00 GMT) which is expected to generate little hype as the consensus for the release is quite close to last month's figure of 50.8. A bit later the Fed will publish its meeting minutes at 19:00 GMT, as this is always an important event that might generate massive volatility especially in this key period.

Looking ahead we should expect the ADP release for the Nonfarm Employment Change tomorrow that might set a reference point to the much expected Nonfarm Payrolls release and the unemployment rate on Friday. Both figures are expected to come out significantly weaker than last month, and it appears that the releases will probably drag the Greenback further down if no surprises occur.