Article Highlights

  • U.S. initial jobless claims at 259K vs. 247K consensus
  • U.S. new home sales down from 598K to 536K vs. 585K forecast
  • U.S. flash services PMI up from 53.9 to 55.1 vs. 54.4 forecast
  • U.S. CB leading index showed 0.5% gain as expected
  • House Republicans to repeal Dodd-Frank by spring?
  • Talks of imposing 20% border tax on Mexican imports
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Not even a couple of downbeat reports could keep the dollar down in the latest New York session, as talks of financial deregulation gave the currency a boost.

Major Events:

Mixed U.S. data – The economic calendar was a mix of green and red, as a couple of figures came in below expectations while others managed to print upbeat results. Initial jobless claims showed a larger 259K increase in unemployment versus the 247K consensus and the earlier 237K reading. New home sales slipped from 598K to 536K, sharper than the estimated decline to 585K and keeping in line with weaker than expected existing home sales.

On a positive note, the CB leading index came in line with estimates of a 0.5% gain, higher than the earlier 0.1% uptick. Underlying data indicated that the gains were driven by improving sentiment on economic outlook, suggesting that the strong momentum could carry on or even accelerate for the first few months of this year. Meanwhile, the U.S. flash manufacturing PMI jumped from an upgraded 53.9 reading to 55.1, outpacing the consensus at 54.4. Components of the report showed that this was mostly due to faster gains in business activity and new work.

Trump watch: Financial deregulation and Mexican border tax – Trump and his team seem to be settling in the White House comfortably, eager to get the ball rolling on their “America First” economic agenda. After signing an executive order to build the wall on the U.S.-Mexico border, Trump said that this project would be funded through a 20% border tax on Mexican imports. Cue Mexican President Nieto canceling his meeting with the Donald.

In other Trump administration news, House Republicans are gearing up to dismantle the Dodd-Frank act as part of their financial deregulation plans. Lawmakers are expected to come up with alternative facts – I mean, legislation – in the coming weeks in order to file a replacement bill preferably by spring.

“No bureaucrat in Washington should be able to tell hardworking Americans what kind of credit card, bank account, mortgage or retirement advice they can have, but that’s exactly what Dodd-Frank does.  As the President and Vice President have said, Dodd-Frank makes it harder for people to get loans to buy a home or start a small business,” noted House Financial Services Committee Chairman Jeb Hensarling in a press statement.  “Instead of ending ‘too big to fail,’ Dodd-Frank institutionalizes bailouts for big banks. Dodd-Frank’s regulations give Wall Street a competitive advantage over community banks and credit unions.”

Major Market Movers:

USD – The Greenback recouped some of its losses from earlier in the week on talks of financial deregulation, as this could be good news for lending and spending activity.

EUR/USD fell from 1.0720 to a low of 1.0657, USD/JPY ticked up from 114.17 to a high of 114.88, GBP/USD retreated from 1.2660 to a low of 1.2556, and USD/CHF is up from .9976 to a high of 1.0027.

Watch Out For:

  • 11:30 pm GMT: Japanese national core CPI (-0.3% expected, -0.4% previous)
  • 11:30 pm GMT: Tokyo core CPI (-0.4% expected, -0.6% previous)
  • 12:30 am GMT: Australian import prices q/q (+0.4% expected, -1.0% previous)
  • 12:30 am GMT: Australia PPI q/q (0.2% expected, 0.3% previous)
  • 5:00 am GMT: BOJ core CPI (0.1% expected, 0.2% previous)
  • Chinese banks closed for the Spring Festival holiday

See also:

London Session Recap

Asian Session Recap

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