Forex Blog

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.

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.