Let's review last week's release of US economic data and the market's reaction after one hour of each release.
Durable Goods Orders
Last wednesday, we had durable goods orders. This report measures the monthly increase in new purchase orders placed with domestic manufacturers for hard goods. The actual number was waaaay below expectations.
The report was released at 8:30 EST. Here's how many pips each major currency pair moved one hour after the release. Even with a "bad" report, the dollar still strengthened.
Gross Domestic Product
The next day brought the gross domestic product (GDP) numbers. Gross Domestic Product (GDP) measures the value of all goods and services produced by the US economy. GDP is the broadest measure of economic activity and the primary gauge of an economy's health.
While it came out only slightly below expectations, it was still enough to convince traders to sell the dollar.
Existing Home Sales
On that same day, exactly an hour and half later, came the existing home sales number. It measures the number of previously constructed homes that were sold last month. Since existing homes make up a much bigger portion of the housing market than brand new homes, this report is extremly important indicator of trends in the housing market.
It came out slighly higher than expected, which probably caused some of those traders who dumped their dollars an hour and half ago, to buy them back. This is also known as short sellers covering their positions or buyers who were sitting on the sidelines jumping in the game.
Personal Consumption Expenditures (PCE) Core
Ah the good 'ol PCE Core. This indicator is the Fed's preferred measure of inflation, which the market is all over it when it's released. PCE Core measures the rate of inflation experienced by consumers. Like CPI, it reflects the price change in consumer goods and services. But unlike CPI, it only measures goods and services for individuals. Here's what happened:
Wow! The forecasted number was actually correct! That happens like once in a blue moon. So PCE Core came in "as expected" which means you'd probably expect the market to move very little since the forecasted number should already be "priced in"...right?
Wrong. If you're familiar with Big Ben and his gang called the Federal Reserve, they prefer the PCE Core to measure between the 1% and 2%. The recently released number is 2.1% which is just right outside of the Fed's comfort zone. While this doesn't guarantee that the Fed will hike interest rates, it adds a little bit of fuel for the Fed to go that direction, which is definitely dollar bullish.
- Dollar Bulls Planning a Surprise Attack? 21:09 27 August 2006
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- Dissecting the Fed Statement 20:21 10 May 2006
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- What the Heck is PPI and Why Should I Care? 07:00 14 July 2010