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USD and JPY Gain on Poor US Macro Data

The mix of fundamental data from the US was not encouraging. The macro data pointed to continued falling house prices, a less robust increase in activity from the Chicago PMI, as well as less confident consumers. All 3 reports came in below expectations, and coincided with some negative headlines out of Europe in regards to the completion of Greek debt negotiations.

US Consumer Confidence Slides

Consumer confidence declined in January, as the Conference Board measure fell to 61.1 from December’s 64.5. This was a big undershoot of expectations of a rise to 68.2. What that means is that consumers – despite an improving labor market situation – continue to be worried about economic prospects.

Those saying “jobs are plentiful” fell to 6.1 from 6.7, while the “jobs hard to get” index rose to 43.5 from 41.8. This could imply a further reduction in consumer spending as we saw in December when personal spending was flat.

Chicago PMI Softer Than Expected

The Chicago PMI Business Barometer index came in at 60.2 in January, weaker than market expectations of a rise to 63.0. As a leading indicator for the ISM Manufacturing PMI which is due to be released tomorrow, this could be a bad omen, though a level near 60 still shows modest expansion.

• The new orders index fell to 63.6 from 67.1.
• Production fell to 63.8 from 64.9.
• Employment was down to 54.7 from 59.2.

Housing Prices Fall Further in December

Housing prices in the US continue to decline, with the drop in prices accelerating in November. The 20-city SP/Case-Shiller house price index was down 3.7% on the year, worse than expectations of a 3.3% decline. Falling housing prices continue to put pressure on the US housing market as it keeps many homeowners “underwater” on their mortgages, limits chance for mobility, and continues to weigh on the balance sheets of banks.

SP Weakens Post News, But Holds Above 200-EMA

The news was enough to dent risk sentiment in the US morning, with the SP500 futures index paring its overnight gains, though finding support at the 200-ema (thick gray line). The RSI was also in a slightly overbought position heading into the NY morning. A further correction here would imply that the downward move seen the previous 2-3 sessions may extend after the 61.8% retrace of the most recent downswing found resistance at today’s highs near 1316.50.

The implication to the currency markets is that a pull back in risk appetite and move towards risk aversion can help the JPY and USD against higher yielding commodity currencies like the AUD, NZD, and CAD, though the EUR is coming under considerable pressure in today’s NY session.

The news may help the JPY more as weaker economic data from will increase speculation over whether the FOMC will undertake further monetary easing in the form of more bond or mortgage-backed securites purchases.

Article source: http://feeds.actionforex.com/~r/ActionForexall/~3/MTcUfqnm4bU/

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U.S. Confidence Takes a Step Back in January

The Conference Board’s index of Consumer Confidence declined in January to 61.1 from 64.5, defying market expectations for an increase to 68.0.

Most of the headline contraction came from a decline in the present situation index, which fell to 38.4 from 46.5 the month prior. The future expectations index held relatively steady at 76.2 (from 77.0 in December)

The labor index fell modestly in January, slipping to -37.4 from -35.0 in December. This, however, remains above the -43 readings registered in the late summer and early fall of 2011.

Key Implications

Overall this was a disappointing report. With the global economy slowing and domestic fiscal policy a drag on growth, the well being of the U.S. consumer is crucial to the recovery. Today’s number, coupled with yesterday’s disappointing personal spending data, offers a reminder that underlying demand is still too soft to absorb the economy’s excess slack.

That being said, the labor index’s performance was not all bad. While the sub-index’s decline this month was discouraging, it remains at a level consistent with the stronger job growth we’ve seen since November, and offers a promising sign that the job market’s recent momentum will be sustained in this Friday’s employment report.

Article source: http://feeds.actionforex.com/~r/ActionForexall/~3/TF-joIt9cV0/

Tags: analysis, articles, charts, education, forex, learning, market