Trading Economic News - Page 40

John Rivera · #**586** (**permalink**) 07-30-2009, 11:44 AM

U.S. GDP figures tomorrow, watch the personal consumption numbers as they may get the most attention if the print is close to inline. Fears are that rising unemployment will keep consumers cautious which could limit the scope of the recovery. If this is the case then the recent rise in equities may be susceptible to a reversal as valuation may have surpassed future earnings. A increase in risk aversion could lead to dollar support and weigh on high yielders.

mostafa99 · #**587** (**permalink**) 07-30-2009, 02:12 PM

Quote:

Originally Posted by John Rivera

U.S. GDP figures tomorrow, watch the personal consumption numbers as they may get the most attention if the print is close to inline. Fears are that rising unemployment will keep consumers cautious which could limit the scope of the recovery. If this is the case then the recent rise in equities may be susceptible to a reversal as valuation may have surpassed future earnings. A increase in risk aversion could lead to dollar support and weigh on high yielders.

does it means that dollar could fall after the news?

John Rivera · #**588** (**permalink**) 07-31-2009, 10:55 AM

We saw some initial dollar support as 1Q GCP was revised lower to -6.4% from -5.5% but we are seeing the greenback start to sell off. We are seeing equity markets continue to trade higher as they focus on the improvement to -1.0% and not last quarter's lower revision. Sharp increases in exports and gross private investment are encouraging, but government spending was the only positive contribution. Also, a 1.2% drop in personal consumption has to raise concerns that the U.S. consumer may not be ready to pick up the slack when government spending fades. We have still only seen 10-15% of the $787 billion stimulus plan spent, therefore if we could see consumers start to pick up their spending then a return to growth could come in the third quarter.

watashiLQ · #**589** (**permalink**) 08-03-2009, 02:00 AM

Hi Mr Jonh Rivera,

From what i know (correct me if i'm wrong),if equities goes higher , commodities will go lower. As we are seeing that EUR USD is near its recent top and the dollar index near its support, if a breakout occurs, does that means that the equities are bound to rise as the USD is falling down?

Regards,
Ryo

John Rivera · #**590** (**permalink**) 08-03-2009, 10:17 AM

Quote:

Originally Posted by watashiLQ

Hi Mr Jonh Rivera,

From what i know (correct me if i'm wrong),if equities goes higher , commodities will go lower. As we are seeing that EUR USD is near its recent top and the dollar index near its support, if a breakout occurs, does that means that the equities are bound to rise as the USD is falling down?

Regards,
Ryo

That hasn't been the case over the past five years actually commodities and equities have traded in the same direction as they are both risky assets. Look at the chart below it is the CRB commodity index against the Dow and you can see they have mirrored each other.There are cases of divergence, often the dollar and commodities trade in opposite directions. Stocks are currently negatively correlated to the dollar but this isn't typically the case. Therefore, although now the dollar is falling when stocks rise the relationship should change as the economy returns back to growth.

watashiLQ · #**591** (**permalink**) 08-03-2009, 11:42 AM

Thanks Dr John, would you mind explaining why do USD get weaker on bullish reports?

Regards,
Ryo

FoxyPowers · #**592** (**permalink**) 08-07-2009, 08:23 PM

Quote:

Originally Posted by John Rivera

That hasn't been the case over the past five years actually commodities and equities have traded in the same direction as they are both risky assets. Look at the chart below it is the CRB commodity index against the Dow and you can see they have mirrored each other.There are cases of divergence, often the dollar and commodities trade in opposite directions. Stocks are currently negatively correlated to the dollar but this isn't typically the case. Therefore, although now the dollar is falling when stocks rise the relationship should change as the economy returns back to growth.

Hi All,

Noob here. Started FX this Summer. Been floating around Twitter & other forums recently, but after learning some hard lessons, returning to the bosom of a good family. ;-)

Normally inverse relationship between USD & equities, as seen in recent risk fuelled bull rally. But 7th Aug's NFP, with jobless rate declining 1st time since April 08, sparked risk aversion & USD bids, meaning

Quote:

A higher dollar on positive economic news could be a sign that investors are returning to trade based on the currency's fundamentals; a viable sign of a recovery in the U.S. Ref. (AC Markets)

Question. So why is the USD now trading on fundamentals as opposed to risk? If this positiveness is maintained, will the USD continue trading this way?

Be lucky!

Sofia.forex · #**593** (**permalink**) 08-08-2009, 02:53 AM

The US Dollar slipped again while erasing morning session gains on Wednesday, after a key job report came out showing that the economy cut few jobs in July than in June. The data however did come in worse than what was anticipated, which is causing Forex and market investors to feel that the recovery will be a long and painful one.

It has been hard for the Dollar to sustain a rally as of late due to a deep rooted trend to sell the Dollar on hopes of a recovery.

John Rivera · #**594** (**permalink**) 08-10-2009, 12:04 PM

In order to understand the the different reasons for the dollar reacting differently to positive data, you have to look at supply and demand. Dollar gained post Lehman as demand for U.S. Treasury bonds increased and investors needed dollars to buy them. As data improved demand for higher yielding assets returned (Risk Appetite), therefore investors needed to sell dollars in order to purchase other assets thus increasing the supply and lowering its value. However, now that a significant amount of money has left Treasury bonds and went into other assets outside the US , ie Chinese stocks, demand for US equities will require money to come from those assets and thus increase the demand for dollars , increasing its value. Also, the better the US economy does the greater interest rate expectations are, which is the main driver of currency price action. If interest rates rise on Treasuries then demand will return for them if they generate yields close to riskier assets as they are still the safest investment.

John Rivera · #**595** (**permalink**) 08-12-2009, 11:01 AM

The FOMC rate decision today will present significant event risk as it could alter the growth outlook and interest rate expectations. If we saw the central bank add to its quantitative easing efforts it would send a strong signal that a recovery is still far from certain and may take longer than expected. Conversely,comments made regarding an exit strategy over concerns of future inflation risks would raise optimism and interest rate expectations. However, we may see something in between as Fed Chairman Bernanke is well aware of the impact that his comments would make and may be reluctant to sway sentiment in either direction at this junction.

John Rivera · #**596** (**permalink**) 08-13-2009, 10:25 AM

US retail sales unexpectedly fell by 0.1% as declines in building materials, electronics and gasoline receipts outweighed a gain in automobile sales driven by the government rebate program. Stabilizing oil prices have led to feed through to the pump and led to a reversal in the component which had been an out performer the prior two months. The decline in building materials could be a sign that recent gains in new construction are being reversed. The sector main driver of the economy and accounted for a third of the layoffs in July. The 1.4% drop in electronic sales was the 5th straight monthly decline and a strong sign that consumers continue to reign in discretionary spending which could limit future growth. The Fed in their minutes yesterday views that the econbomy is stabilizing which may already be priced into the markets and if the outlook for domestic growth dims, then we could see a pull back in risk appetite and support for high yielding currencies.

John Rivera · #**597** (**permalink**) 08-19-2009, 10:35 AM

Overnight we saw the BoE minutes show that Governor King and two other members voted to extend the asset purchase program by 75 billion but was out voted 6-3 for the 50 billion that was announced. This was somewhat surprising considering that 25 billion was expected. The central bank feared that if the liquidity efforts weren't increased then risks would increase that inflation would persist below their 2% target as considerable slack remains in the economy despite recent signs of stabilization.

John Rivera · #**598** (**permalink**) 08-20-2009, 11:01 AM

The pound continues to fluctuate as the fundamental data and BoE concerns continue to conflict. Retail sales rose for a consecutive month in July by 0.4%, as demand for household goods rose 4.5%. However, a report showing that government borrowing was 8.0 billion in July versus the 200 million that was expected raise concerns that the tax rates will be hiked in the future to make up for the shortfall. Additionally, Treasury chief Alistair Darling stated that the government must stick with its expansionary policy to ensure growth despite signs of a recovery. The showing 3 votes to expand its asset purchase program by 75 billion versus the 50 billion that was announced raise concerns that the government' outlook is far more bearish than the markets and has weighed on the sterling.

Sean Hyman · #**599** (**permalink**) 08-20-2009, 01:51 PM

Geithner comments courtesy of Terri Belkas:

Terri Belkas (TerriBelkas) on Twitter

US Treasury's Geithner says "fear" is giving way to "emerging confidence," job losses are slowing, banks starting to "pay us back."

US Treasury's Geithner says US economy showing "first steps to recovery," and "we are starting to see signs of stability."

Sean Hyman · #**600** (**permalink**) 08-21-2009, 10:10 AM

Opening comments from Chairman Bernanke that prospects for growth are 'good' and fears of financial collapse have receded are no surprise.

John Kicklighter (JohnKicklighter) on Twitter