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An Overview of the latest news

Written by A Forex View From Afar on Thursday, May 01, 2008

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Wednesday's calendar made it one of the busiest days in recent times. Highlighting the important parts; we had the Bank of Japan Interest Rate decision, the ADP numbers, Cad and US GDP, and the FOMC decision. We won’t see a day like this again too soon.

If the Interest Rates decisions are well known, hold for BoJ at 0.50% and cut to 2.00% for The Fed, The US GDP and the ADP numbers will be discussed in just a few lines, as for some of today’s releases.

The GDP number came in at 0.6% annualized, being translated in a 0.15 to 0.20% quarter gain. A lot of analyst said there were two major factors making the GDP look better then it actually was. The first was the deflator number, the number subtracted from the GDP due to inflation. The deflator was calculated by BEA at 2.6%. Many analysts said it should have been bigger (same things were heard when 2007 Q4 appeared). The other factor influencing the GDP was the inventories numbers, which increased the number by 0.8%, pushing the GDP above the 0% rate. The GDP was a nice figure from by the US economy, one that many didn’t expect.

The ADP number came 10k, which is pretty good compared to what the markets had expected, -60k. Taking a close look at the ADP numbers, a lot of jobs were created by the small companies, 42k, being the only ones to add workers to the payroll, but these companies are excluded by the NFP.

Furthermore, the goods-production industry had a loss of 54k jobs, compared with a 64k gain in the Service side of the economy. This somehow, defies the recent trends; the cheap dollar helping exporters, but what is to export when the good-production companies are deleting jobs at this pace, making it the seventeenth consecutive monthly decline? Of course, I’m a little pessimistic about the 64k added jobs in service side of the economy too. They appear a little too many, from were we are standing right now.

The weak dollar gets things going with the ISM Non-Manufacturing report, with 71%(!!!) of respondents reporting higher prices, making the trend now at 16 months. Except Methanol, all commodities are reported higher. The ISM shows the Export part of the economy is doing quite well, expanding for the last 65 months. Impressive, isn’t it?

Here are some of the respondent’s opinions:

• "The decline in the value of the dollar is dramatically affecting our material prices because we purchase over half of our material requirements from overseas." (Transportation Equipment)
• "Higher energy rates, unfavorable exchange rates, high levels of inflation in Asia and a drop in demand are challenging our business and supply chain." (Nonmetallic Mineral Products)
• "Continued bio-fuel/spec investor driven inflation of commodities is stifling!" (Food, Beverage & Tobacco Products)
• "Still strong in spite of general business slowdown." (Primary Metals)
• "Oil, oil, oil, energy, energy, energy, metals, metals, metals." (Fabricated Metal Products)

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Fundies and Trading
There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

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