Following the Memorial Day holiday, all US economic data have been piled onto today’s schedule. With the EUR/USD trading down this morning, traders will be highly sensitive to analyst forecasts on the US manufacturing and housing markets today, which are estimating modest traction in the economy. US bulls could charge on any positive sentiment.
US Dollar Rally
The EUR/USD dipped to 1.0885 this morning just before the London trading session opened, a level not tested since the end of April. Traders who could not get in on the rally on strong US CPI data Friday are going long the greenback this morning.
The holiday hangover trading extends a strengthening dollar against the Euro over the last week based on an improvement in US economic data. Long positions in the USD, however, started to recede at the beginning of last week, declining to $23.5 billion by May 19th, according to ScotiaBank Global FX Strategy. This Friday’s CFTC Commitment of Traders report is likely to show some short covering, precluding any major misses on consensus estimates today.
Long Positions in the US Dollar as of May 19th
The Key US Economic News of the Day
Analyst forecasts portray a US economy slowly pulling out of negative economic territory. Any acceleration of growth on the upside in today’s data will be cheered on by the market. April U.S. Durable Goods Orders to be announced at 13:30 GMT are expected to be down -0.6%. Following a year-over-year rise of 4.7% for March manufacturing goods, a positive number will indicate momentum in the manufacturing sector.
At 15 GMT, we will find out whether US consumers are loosening their wallets, spending more discretionary income and helping to push inflation up towards 2%. Two percent is the targeted inflation level at which the Federal Reserve will hike the federal funds rate. The US Consumer Index is expected to be down a smidgen, .1, to 95.1.
US New Home Sales, forecasted to be up 490K, up from 481k in March, will be watched closely. Homes prices are expected to show no increase over March. The S&P/Case-Shiller U.S. National Home Price Index for March is also out today. Nationally, house prices were up 0.14% in February, but down -0.07% over the 3-month period.
The larger picture looks brighter for housing sales based on underlying fundamentals. Slower home sales and construction could reflect fewer people moving across the country for jobs. As the market approaches full employment, a trend discerned by Federal Reserve chair Janet Yellen in a speech on Friday, an improvement in housing sales could follow.
The overall trend in housing prices has been rising since the March 2012 decline, while US defaults on first mortgages have been steadily declining since 2008, hitting pre-subprime mortgage crisis lows in 2015, according to the S&P/Experian First Mortgage Default Index.
CFTC Seeks Trading Order Books and Messaging Data
In order to detect market manipulation and new types of gaming strategies, the CFTC requires regular access and surveillance of order books, CFTC Commissioner Mark P. Wetjen told a derivatives trading conference in Amsterdam on Thursday. To avoid market instability such as that caused by the October 2014 flash crash in 10-year treasuries, the CFTC is proposing a joint surveillance effort of order information with the exchanges.
Meanwhile, in the UK, the prosecution of the first trader in the Libor rigging case starts today. Tom Hayes, a mathematician and former trader at UBS AG and Citigroup, is being portrayed as the “ringleader.” While Hayes – nicknamed “Kid Asperger” by colleagues – goes on trial with other brokers, none of the banks’ executives have been charged at this time, reports WSJ.com.
Last week, five banks accused of rigging currency markets were fined $5.6 billion. The global Libor benchmark manipulation is estimated to have cost US municipalities alone $6 billion. The Libor benchmark is used as the global bank lending rate, in foreign exchange and derivatives trades (representing approx. $320 trillion in value), and daily in business contracts.