Forex Trader Top 3: Euro Plunge, Smoked Pound and Propped Dollar
Mark Whistler is the founder of www.WallStreetRockStar.com and is the author of multiple books on trading. Mark’s newest book, The Swing Trader’s Bible – co-authored with CNBC/Fox News regular guest Matt McCall – will be on shelves in late summer, 2008. In addition, Mark also writes regularly for TraderDaily.com and Investopedia.com.
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1. U.S. Personal Income Triggers Euro Plunge
The News:
Personal income gained 0.3% in March, down from the 0.5% growth in February.
The Breakdown:
While personal income numbers show a 0.3% gain in March, overall consumer spending grew 0.4% in March, which was double the typical analyst expectation. What’s more, removing price inflation, the spending number only grew 0.1%.
Overall, real spending increased about 1% in the first quarter, on an annualized basis. We haven’t seen these types of numbers since the dot.bomb era.
Looking forward, markets will be closely watching consumer spending habits to see if the tax-rebate checks – which start rolling in May – will truly help buoy the economy. Overall though, Thursday’s consumer spending data certainly could have been worse given the present state of affairs in the U.S. economy.
The Bottom Line:
U.S. dollar bulls will likely find reason to raise their reversal bets within the market, given that while the U.S. economy is still underperforming overall, it is showing faint signs of a heartbeat – every so often.
2. Dour UK Manufacturing Smokes Pound
The News:
The CIPS/NTC UK Manufacturing PMI dropped from 51.3 in March to 51.0 in April.
The Breakdown:
While the UK manufacturing number may not seem like a ton, it’s actually fairly significant, when considering year over year conditions. At this time in April 2007, the manufacturing PMI number showed 53.9, thus clearly indicates that activity has boldly declined over the past twelve months.
If you’ve been watching the GBP/USD, you may have noticed EXTREME volatility lately, as just yesterday the pound rallied up to 1.9900 – almost exactly – from the 1.9650 area.
This morning, from about 8:00 AM EST to 9:30 PM EST, the pound had dropped roughly 130 PIPs.
The Bottom Line:
Much like the United States, UK economic numbers are all over the place, though the overall trend is showing weakness. The aforementioned paints the perfect storm for volatility, which is killing Forex traders who do not have money management plans in place, or who do not fully understand how to place stop orders to protect capital.
3. U.S. ISM Props Dollar
The News:
U.S. ISM Spending came in stronger than expected this morning, which is helping prop up the U.S. dollar.
The Breakdown:
The market expected ISM Spending for April to clock in at 48.0, however, the actual number came in at 48.6, slightly beating expectations. It is important to note that any reading below 50 indicates manufacturing contraction; however, the slight improvement in April is certainly a step in the right direction.
It is important to note that employment within the report decreased from 48.7 in March to 45.4 in April and is a red flag. However, overall production increased from 48.7 in March to 49.1 in April, indicating that manufacturers are ramping up slightly.
The Bottom Line:
The numbers could have been a lot worse and if anything, actually paint a reasonably bright picture for some sort of recovery within the U.S. economy, if employment can kick back into gear as well. Today’s ISM report should reinforce FOMC policymakers decisions that they made the right move yesterday, while also letting the market know that the Fed is done cutting rates for a while. Overall, today’s ISM Index is very bullish for the U.S. dollar, especially against the franc, pound and euro.