Forex Blog

May Day resulted in some unexpectedly bad fundamental data releases from the United States. Labor market, income, spendings, construction and manufacturing were covered in today’s reports and none of them showed something optimistic for the dollar bulls; nevertheless EUR/USD was down today and the dollar managed to show some unfounded strength on the Forex market.

Initial jobless claims rose up from 345k (also revised up from 342k) to 380k last week, showing a further decline in employment.

Personal income rose 0.3% in March, while personal spending was up 0.4%. And, while spending was above the expected 0.2% growth, income growth was below the expectation of 0.4% growth last month.

Construction spending in March decreased faster than the analysts expected — it was down by 1.1% compared to February, while a 0.7% drop was expected.

ISM manufacturing index was reported to be unchanged at 48.6% in April — better than the expected drop to 48.0%.

U.S. fundamental statistics, that were released today in abundance, appeared to be worse than the market analysts expected. It helped the EUR/USD currency pair to reach its new absolute maximum value at 1.5968 and kept dollar bearish also against the other major currencies.

CPI (Consumer Price Index) rose 0.3% in March — at the same pace as expected. In February this indicator was at 0%.

Housing starts and building permits declined rapidly in March — they were at 947k and 927k respectively, while the forecast values were at 1,010k and 970k respectively. In February housing starts were at 1,075k and building permits were at 984k. All numbers are presented at a seasonally adjusted annual rate.

Industrial production showed a surprise growth at 0.3%, while a fall by 0.1% was expected and it fell 0.7% in February. Capacity utilization remained at the same level in March as in February and as expected — 80.3%.

Crude oil inventories dropped 2.3 million and are in the lower half of the average range for this time of year, as the Energy Information Administration reported.

The EUR/USD currency pair post some small drop today on Forex as the fundamental situation in U.S. economy looked better in April for the manufacturing sector. All of the reports that were released today in U.S. showed a positive dynamics for the dollar, helping it to go up against euro, pound and yen. EUR/USD is currently trading at 1.5784.

Producer Price Index in March grew at an unexpected pace — 1.1% compared to 0.3% in February and 0.6% consensus forecast for March.

NY Empire State Index report showed a sharp improvement in the manufacturing sector survey. The index went up from -22.2 to 0.6. It was expected to go up to -17.0 today.

Net foreign purchases of the long-term U.S. securities in February 2008 were also significantly higher than both expected and the previous month values — $72.5 billion. In January they were $57.1 billion (revised down from $62.0 billion) and in this month they were expected to fall to $60.0 billion.

After a weird 100 pips gap at today’s Forex trading opening on EUR/USD pair, the U.S. dollar went sharply down. It’s now forcing to stay at as little as 50 pips below the absolute maximum as the Forex traders fail to conclude a definite opinion on how to react on the fundamental statistics that came out today in U.S.

Advance retail sales in March rose 0.2% compared to 0.1% forecast and 0.6% fall in February.

Business inventories in February were down 1.1% compared to January’s value. The inventories were expected to grow by 0.4% and they showed 0.8% growth in January.

EUR/USD reached a new record high level at 1.5913 today, but after some positive fundamental data was released in U.S. the currency pair went down, as the dollar started to regain strength on the Forex market. ECB’s decision to hold the interest rates at 4% also improved dollar’s positions on the market.

Initial jobless claims unexpectedly fell by 53k the last week — from the revised 410k value to 357k. A fall to 383k has been expected by the market analysts.

February U.S. trade balance deficit came out to be far worse than the majority of the investors expected — $62.3 billion, up from January’s $58.2 billion. It was expected to go down to $57.4 billion.

Treasury budget deficit was lower than the expected $70.3 billion value in March. It was $48.1 billion — better than the last year’s $96.3 billion deficit for the same month.

Despite the fact that the ISM PMI for manufacturing sector is still below the significant 50 level and the construction spending continued to fall in February, today’s economic releases inspired the stock market’s rally and the strengthening of the U.S. dollar. EUR/USD fell down from 1.5763 to 1.5582, making this day’s fall already a second largest in the last two weeks.

Construction spending in February decreased at a lesser extent than the majority of the analysts expected — it fell 0.3% against the expected 0.9%. It fell 1.7% in January.

ISM report on manufacturing showed that PMI increased slightly in March and is now at 48.6% up from 48.3% in February, while it was expected to fall to 47.5%.

EUR/USD turned to a mainly bearish trend after the GDP and unemployment statistics were released in U.S. today at 8:30 EST. Dollar went up from 1.5845 to 1.5750 dollars per euro.

The gross domestic product in the fourth quarter of 2007 gained 0.6% as was forecasted by the major market analysts and the previous GDP report. While the value is definitely low, it’s still above zero and it also held stable against the expectations of the possible revision.

Initial jobless claims last week decreased slightly — they went down from 375,000 (revised down from 378,000) to 366,000. The consensus expectation was at 371,000.

The EUR/USD currency pair reached its new absolute maximum earlier today at 1.5902, but it has significantly corrected already and is trading around 1.5750 level.

The first falling indicator that went out today to negatively affect the financial situation on the global market and weaken the U.S. dollar further was the NY Empire State Index for March, it decreased from -11.7 to -22.2, its new all-time record low level. The economic analysts forecasted that it will go up to -5.

Industrial production and capacity utilization report was very disappointing too. Industrial production in February fell 0.5% after the January’s 0.1% growth and the 0.1% forecasted fall for February. Capacity utilization decreased from 81.5% to 80.9% (it was expected to fall to 81.3%).

Net foreign purchases of the long-term securities in January were very optimistic — they went up from $56.5 billion to $62.0 billion, showing that the foreign investors are still interested in the U.S. securities.

During the last nine days, only one day didn’t bring a new absolute record level on EUR/USD; it was last Friday, March 7. Today EUR/USD reached a new maximum value at 1.5687 renewing the yesterday’s record at 1.5644.

In February seasonally adjusted CPI didn’t change at all according the report of the Bureau of Labor Statistics. In January it grew by 0.4% and for this month the majority of the market analysts expected a 0.3% growth.

March preliminary Michigan Sentiment index was released at 70.5, while it was expected to fall from 70.8 to 69.5.

Although the U.S. trade balance deficit in January has actually widened compared to December’s revised value, it was significantly below the analysts’ expectations. The negative difference between the exported and imported goods’ value was at -$58.2 billion which is slightly above the December’s -$57.9 billion (revised up from -$58.8 billion). The trade balance deficit was expected to increase from $58.8 billion to $59.0 billion. The reason for the deficit "widening" was that the imports grew faster than the exports in January.

EUR/USD reacted sharply on the trade balance news release and went down from 1.5455 at the time before the release to about 1.5327 as of 14:22 GMT.