Forex: U.S. Philadelphia Fed. Index Declined Unexpectedly in January; USD/JPY Bearish
THE TAKEAWAY: [U.S. Philadelphia Fed. Index in January unexpectedly dropped] > [Business activities decreased as well as new as new orders and employment] > [USD/JPY weakened]
Business outlook survey index in the Philadelphia region declined in January, suggesting that the activities in the manufacturing sector contracted moderately this month. According to a reported released by the Federal Reserve Bank of Philadelphia today, business activity index came in at -5.8 after registering a revised reading of 4.6 in the previous month from 8.1 initially stated. The median forecast of 58 economists survey by Bloomberg News had called for 5.6. Estimates ranged from -3 to 10.
The Philadelphia Fed’s Business Outlook Survey is released monthly, and covers business confidence of manufacturers in eastern Pennsylvania, southern New Jersey and Delaware. A reading above zero signals a positive outlook while a reading below zero signals a negative outlook.
The forward-looking index is viewed as one of the first monthly indicators leading up to the ISM Manufacturing report. In January, regional business activity slowed down as demand for manufactured goods decreased. Also, employment index dropped to -5.2 from -0.2 in December, indicating labor market condition became worse. The survey’s future indicator, however, suggested that firms expect recent declines to be temporary and showed stronger confidence in business activities over the next six months.
In the Beige book released yesterday the Federal Reserve said that the U.S. economy has picked up across much of the districts in December, with either modest or moderate growth pace. In particular, Philadelphia districts had rebounded from the immediate impacts of Hurricane Sandy. Thus, coupled with improved business conditions in manufacturing and sales, regional growth is likely to become more optimistic in the next few months.
Chart created using Market Scope – Prepared by Renee Mu
The U.S. dollar was dropped in the minute after the U.S. Philadelphia Index was released. As can be seen from the one-minute chart above, the USD/JPY pair fell to 89.31 yen from 89.39 yen. At the time this report was written, the USD/JPY pair traded at 88.28 yen.
--- Written by Renee Mu DailyFX Research
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