Forex Trading TV Video Blog

The U.S. Labor Department published yesterday its weekly data concerning the number of the U.S. initial claims for state unemployment insurance aid. The data indicated a drop of 9,000 to 348,000 - slightly better than Wall Street’s consensus expectation of 350,000. The December trade balance came in at a monthly deficit of $58.8B, lower than the expected $61B. The trade deficit totaled $711.6 billion for all of 2007, down 6.2 percent from the record set in 2006 and the largest annual percentage drop since 1991. As the subprime crisis continues to drag down the U.S. economy, a private report indicated yesterday that Sales of Existing Homes fell in 45 states during the October-December quarter, and Nationwide, Existing Homes sold at an annual rate of 4.96 million units in the 4th quarter, down 21% from the sales pace of the 4th quarter in 2006. In addition, Fed Chairman Ben Bernanke hinted yesterday that more rate cuts could be on the way in his statement in Washington. Bernanke mentioned that the outlook for the economy has worsened in recent months, indicating that the Fed would probably keep its insistent strategy in the short term. Although inflation remains a concern, Bernanke restate his certainty that prices would moderate this year. As a consequence of Bernanke’s statement, The U.S. dollar dropped against 14 of the 16 most-active currencies and it headed for the biggest weekly loss since December against the 15- nation currency. Today to close out the week, the U.S. economic data will be released at 13:30 GMT as we await the figures from the Empire State Business Conditions Index and the Capacity Utilization. Later, the U.S. Industrial Product and Consumer Sentiment will also print there figures. Forex traders should keep an eye on the economic events around the world, as today could prove to be very volatile.

The USD continued to rebound yesterday after a surprising gain in January Retail Sales suggested consumer spending was holding up. Retail Sales increased 0.3% last month, following a 0.4% drop in the prior month.

Government data showing higher Retail Sales in the month of January - diminished economists’ expectations for a decline in the greenback. The report was also a surprise for investors because it followed a weak January jobs report and shrinking service sector numbers, which normally acts as an early indicator to sub par Retail figures .

Yesterday’s data pushed the greenback primarily against the JPY, while against the rest of the major currencies such as the EUR and GBP, the USD remained relatively unchanged. Traders continue to scale back positions ahead of today’s’ testimony by Fed Chairman Ben Bernanke. The Federal Reserve Chairman may signal more rate cuts in the near future, as the last few days of bullish dollar behavior may only be a glitch in the bearish dollar trend that has existed for most of 2007 and 2008. Based on Interest Rate Futures, markets are expecting the Fed to reduce its benchmark interest rate to as low as 2% this year, although expectations for another 50bp rate cut have decreased. The market is now pricing in a 68% chance for 50bp cut, down from yesterday’s 80%.

Today, the greenback’s momentum may continue as all attention will be focused on the U.S. Trade Balance, Unemployment Claims data and Fed Chairman Bernanke’s speech. We may see the greenback extend its gains across the board if the U.S. news surprises on the upside but it may also retreat slightly as the current market sentiment seems to be that the recent USD rally is running out of steam.