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Manufacturing Data Offers Mixed Message For the Dollar; TICS Ok

Last updated 4/15/2009 9:46 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

The Treasury International Capital system report printed positive for the month of February at $22 Billion versus  -$36 Billion in January providing  a sign of relief to the market that was concerned about the growing trend of capital outflow from US.

Private investors added $25.9 Billion to their holding but foreign official institutions were net sellers of -$5.1 Billion. Overall the trend towards short date securities continued as purchases of T-Bills increased by $68 Billion while other instruments declined by -$25 Billion.  The data suggests that foreigners remain wary of risk, although that may show a change for  March when US equities experienced one their best monthly rallies in stock market history.  

Nevertheless,    current composition of investment flows, leaves US vulnerable to rollover risk as foreign holders continue to maintain the minimum exposure possible to US capital assets via short term maturities. Both China and Japan resumed   their purchases  with Japan adding $27.1 Billion while mainland China’s holdings increased from $739.6B to $744.2 Billion - its weakest pace of growth thus far this year.

The TICS report is likely to be a non-event as the market will focus more on latest industrial sector data which printed mixed results. The Empire survey of manufacturing improved significantly jumping to -14.65 from -35 forecast, but Industrial production slumped to -1.5% from -0.9% anticipated while Capacity Utilization hit a stunning record low of 69.3% versus 69.9% eyed.

The news from the manufacturing sector indicates that the economy continues to remain moribund but the better performance from Empire could be the first sign that inventory drag is being worked off and demand is beginning to stabilize albeit at significantly lower levels.

High beta currencies predictably drooped on the news as US equity futures turned red.  Fed’s beige book is next on the calendar and if it offers no hope of improvement, equities and risk currencies could  drag lower for the rest of the day.  The forces of risk aversion remain dominant for  time being an unless risk appetite returns  the dollar and the yen should gather strength as the day progresses.

 Consumer Price Index Down .1%

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.