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Dollar Falls despite Leading Indicators & U. of Michigan Confidence Beat Forecast

Dollar Falls despite Leading Indicators & U. of Michigan Confidence Beat Forecast

2011-12-22 16:49:00
Trang Nguyen,
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THE TAKEAWAY: The U.S. Leading Indicator and U. of Michigan Confidence Rose More than Forecast > U.S. Economy to Sustain Growth and Consumer Confidence to be Reinforced in Coming Months > U.S. Dollar Continues to Fall

The U.S. leading indicator, a gauge of the economic outlook for the next three to six months, unexpectedly advanced 0.5 percent in November, following a 0.9 percent rise in October and 0.1 percent gain in September, the Conference Board reported today. The reading exceeds median projections of a 0.3 percent gain from 54 economists surveyed by Bloomberg News.

Seven of ten components made up an increase in the November leading index, led by 20 percent pickup in interest rate spread and 0.15 percent rises in building permits. Building permits component significantly contributed to the overall index for the second month after slumping in September asnew constructions hit the twenty-first month high in November. Besides, both M2 money supply and consumer expectations sustained their upward trend, rising 0.11 percent. Stock prices gained with lower pace of 0.06 percent compared with 0.1 percent in October since appetite for risk faded on prolonged and spreading sovereign crisis in Eurozone. Though jobless claim component improved 0.09 percent, the average workweek declined 0.13 percent, reflecting the rise in part-time employment during holiday season.

U.S. Leading Indicator: July 2010 to Present

122211_US_Leading_Indicator_November_body_Chart_1.png, Dollar Falls despite Leading Indicators & U. of Michigan Confidence Beat Forecast

Prepared by Trang Nguyen

Another report issued five minutes later showed that the Thomson Reuters/ University of Michigan final index, which gauge consumer expectations for six months from now, surprisingly surged to 69.9 in December from 64.1 in the previous month, exceeding the consensus forecast of 68 from Bloomberg survey. The preliminary reading of consumer confidence for the month was 57.5. Economic conditions index advanced to 79.6 from 77.9 initially reported, while economic outlook index climbed to 63.6 from 61.1. Inflation expectations for one year and five year ahead remained unchanged in the month at 3.1 percent and 2.7 percent, respectively. The sentiment gauge soars for the fourth straight month in a row after sinking to the lowest level since 1980 in August reflects consumers’ optimism about the economic recovery and stronger expectations on business conditions, employment and income in the U.S. in the intermediate future.

USDCAD 1-minute Chart: December 22, 2011

122211_US_Leading_Indicator_November_body_Picture_1.png, Dollar Falls despite Leading Indicators & U. of Michigan Confidence Beat Forecast

Charts created using Strategy Trader– Prepared by Trang Nguyen

The greenback weakens versus most of major commodity currencies in North America trading session today as earlier report revealed that the U.S. economy expanded less-than-estimated in the third quarter. Gross domestic products for the third quarter grew at a revised annual rate of 1.8 percent, missing 2.0 percent widely expected. As can be seen from 1-minute USDCAD chart above, the greenback continued to trade lower than the loonie despite of better-than-expected leading indicators and U. of Michigan confidence index reports. The USD/CAD pair slips about 25 pips from 1.0240 to 1.0215 within one hour. TheRelative Strength Indicatorfalling below 30-level indicated that currency traders were massively selling greenback in favor of the loonie. At the time this report was written, the U.S. dollar traded at 1.02197 Canadian dollars.

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email tnguyen@dailyfx.com

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

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