Forex Blog

Dollar continued to lose its positions on Forex market today. After the major economic releases came out in U.S. EUR/USD touched a new absolute maximum at 1.5300 and even GBP/USD recovered from the weekly bottom, which was formed after the bad macroeconomic statistics in was released in U.K this morning.

Productivity in the non-farm sector of economy in the fourth quarter of 2007 grew faster than expected — at 1.9%, against annual average of 1.8%; the forecasts were also at 1.8% growth.

Factory orders for the manufactured goods in January fell down at the same pace as they were expected to fall — by 2.5%, that followed a month of 2.0% growth in December.

ISM non-manufacturing index unexpectedly improved in February and went up from 44.6 to 49.3, while an insignificant growth to 47.5 was expected.

Crude oil inventories brought a negative surprise the dollar bulls and the oil bears, as in the past week they declined for the first time in more than two months. They went down by almost 3.06 million barrels.

Nonfarm payrolls is one of the most important indicators of the U.S. economy’s health. Market analysts expected it to grow up in January by 50,000. But in reality it didn’t grow at all, instead it dropped by 17,000. At first, this fueled dollar bears’ activity and drove EUR/USD up close to the historical borders, but then, after release of some other important indicators, it went down to about 1.4800.

The part of the employment report was the U.S. unemployment rate in January — it fell down from 5.0% to 4.9%.

Construction spendings in December fell down by 1.1%, faster than the analysts expected (0.5% drop).

Non-manufacturing ISM report on business activity in January resulted in PMI at 50.7%, showing an increase from the last month’s 48.4% and that it’s significantly better than the forecasted 47.5%.

Index of Consumer Confidence, reported by Reuters and University of Michigan, fell to 78.4 in January from 80.5 in December. Expected value for this indicator was 79.0.

EUR/USD showed a growth of more than 100 pips in one hour immediately after the employment data from the United States were released today. While trading flat and even falling a little during the day, EUR/USD broke through its own record level setting a new historical maximum to 1.4824.

Nonfarm payrolls growth was expected to fall from 94k in November to 70k in December, but the released data was a real catastrophe - just 18k growth. Meanwhile the unemployment rate rose from 4.7% to 5.0% showing that the problems in the U.S. economy are going to be really serious.

ISM services index in December showed a less dramatical decline dropping to 53.9% from 54.1% in November, while a drop to 53.5% was expected.

Dollar started to trade higher today against euro after the productivity report by the Bureau of Labor Statistics came out, as it was trading against pound sterling earlier in the morning after some bearish data on United Kingdom PMI and housing were released.

Nonfarm productivity (revised value) in third quarter of 2007 increased unexpectedly well - by 6.3%. Previous value was 4.9% and the analysts’ expectations averaged at 5.8% growth. This indicator without any doubts will continue to strengthen dollar until the end of the week.

Factory orders in October also showed a growth that almost no one could see happening - 0.5%, while analysts’ consensus was at 0% stagnation.

Bad news came with non-manufacturing ISM report which showed today that November Business activity index in services sector declined to 54.1% from 55.8% in October, which worse drop than it was expected - 55.0%.

Crude oil inventories again were in the red zone, but today with a very high negative value - 8 million barrels drop compared to previous week report. Combined with today’s OPEC decision not to increase oil output, this news may hit dollar as the oil prices will surge to the new maximums.

While dollar continued to rebound its weak positions today after EUR/USD failing to break 1.4180 resistance, fundamental stats from United States again came out below expectations. And again this caused a dollar rally against the Euro currency. ISM report on business activity for September 2007 showed a decrease by 1% - from 55.8% to 54.8% - well below the pessimistic expectation of 55.0%. After this report dollar went high to its weekly minimum at 1.4130 and now continues to gain strength.

One fundamental news that helped dollar and wasn’t negative is the increase of the commercial crude oil inventories by 1.2 million barrels last week. This is logical, since when commodity prices are decreasing, currency gain value. As to the reaction on ISM services index - bad fundamental data now scare stock market investors away, thus making them to cash out into dollars (giving it more demand).

This is a bit confusing situation for the financial markets, since the good economical data from United States should empower USD causing EUR/USD to fall, but today good data on labor productivity and ISM services index caused EUR/USD to soar. This can be explained by the increased optimism in the U.S. economy which causes more big traders to continue carry trading, during which USD is in a downtrend.

U.S. crude oil inventories in the past week fell (again) by 3.9 billion barrels, but still remain at a high level for the current seasonal average. One of the possible reasons for this decrease can lie in a hurricane season (which is quite weak in this year so far).

Initial jobless claims in the past week dropped to 318,000 compared to 337,000 previous week, which while still a high number is better than 330,000 expected by the market. But the more important employment data - nonfarm payrolls for August, will come out tomorrow.

ISM services index (business activity) in August came out at 55.8 level - the same as the month before. This is a good level for this index, especially when analysts predicted its fall to 54.5.

Nonfarm productivity in second quarter of 2007 (revised value) increased by 2.6%. This growth exceeded both the market expectations (2.4%) and the Q1 value (1.8%). High productivity in the nonfarm area is a good sign for the U.S. economy, which by the end of 2007 can show a very strong growth.

Friday, as expected, showed us some real tough action in Forex EUR/USD pair with it hopping high to 1.3800. The first Fridays of the month are often like that - you have an almost flat week of dull trading and then some important news (employment market) come and the whole situation changes fast and completely unexpectedly.
Nonfarm payrolls in July 2007 dropped 34k and came out at 92k level - opposed to 135k expected showing some clear problem which could possible exist in U.S. employment market and thus in the whole economy. Unemployment rate rose to 4.6% from the previous and expected 4.5%, while average hourly earning rose by 0.3% - just as expected.
ISM Services Index was also released today - and it came out to be quite disappointing for the U.S. dollar bulls too - it dropped down from 60.7 to 55.8, while analysts expected at least 59.0 level.