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Empire Manufacturing Data Underperforms Expectations, Fails to Move Dollar

Empire Manufacturing Data Underperforms Expectations, Fails to Move Dollar

2011-05-16 18:18:00
Krishna Yarra, DailyFX Research,
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Today was a busy morning with Empire Manufacturing Index, Net Long-Term TIC Flows, and the NAHB Housing Market Index reports being released and failing to significantly impact the US Dollar. The latter two came in roughly with expectations while the Empire numbers underperformed consensus estimates by a wide margin.

Data Released

Data

Prior

Estimate

Actual

05/16/2011 12:30 GMT

Empire Manufacturing

21.70

19.55

11.88

05/16/2011 13:00 GMT

Net Long-Term TIC Flows

$26.9B

$33.0B

$24.0B

05/16/2011 14:00 GMT

NAHB Housing Market Index

16

17

16

Empire State Manufacturing Survey –The lower than expected result had little effect on the US Dollar and financial markets as underlying factors were more mixed than the disappointing headline would suggest. Factory managers had rosy outlooks on the future commenting on the fact that strong demand from overseas markets combined with a weak dollar meant that exports would be on the rise in the coming months. Employment in the sector was also positive with hiring at its highest point since May 2004. The negative of the story was the rising costs which were at their second highest level since 2001 due to a high jump in commodity prices. While manufacturers did try to pass some of the costs along, the sudden jump dampened the final release number. However, a positive number still represents growth of the manufacturing sector and there have been 6 consecutive months of growth so far. Look to the Philadelphia Fed. data later in the week to provide additional information on the state of the manufacturing sector in the Northeast and the United States in general.

Net Long-Term TIC Flows – The lower-than-expected number, while still signifying net capital inflows, suggests a lower overall demand for American investments and the dollar and may signal American markets being relatively less favorable than other international markets. Indeed, China, the biggest foreign owner of US Treasuries, sold $9.2B worth of holdings while Hong Kong sold $2.5B. Considering that the Total Net TIC Inflows for the month were only $116.0B, these are very large decreases indeed. The TIC Flows Number represents the difference in value between American purchases of foreign securities and foreign purchases of American securities.

NAHB Housing Index- The NAHB Housing Index data was in line with expectations and held at the same level as previous months. There is very little optimism on the part of U.S. homebuilders as there is little demand for new homes and a measure of sales expectations for the rest of the year was at an eight-month low. Any reading lower than 50 for the index is representative of pessimistic outlooks for the housing industry and any number above 50 represents a positive outlook. Out of the four regions (Northeast, Midwest, South, and West), homebuilder sentiment experienced a sharp decline in the Northeast, moderate declines in the West and Midwest, and a small rise in the South. Look to the Housing Starts and Mortgage Delinquencies and Foreclosures data tomorrow to provide more information on the state of the Housing Industry.

Written by Krishna Yarra, DailyFX Research.

To contact the author of this report, please send inquiries to: research@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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