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Dollar Lifted by Solid Chicago PMI Report

Last updated 12/30/2009 10:00 AM ET (GMT -5) 7 Comments

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Kathy Lien

Director of Currency Research, GFT

The sell-off in global equities helped to drive the dollar higher against all of the major currencies this morning and the momentum in the greenback was further fueled by the much stronger than expected Chicago PMI report.  Manufacturing activity in the Chicago region expanded for the third month in a row with the index rising from 56.1 to 60.0, the highest level since January 2006.  The details of the Chicago PMI report reveals overall strength.  Aside from a small contraction in supplier deliveries, every single one of the other underlying components increased in the month of December.  We were particularly encouraged by the rise in production, new orders and employment.  For the first time since November 2007, manufacturers in the Chicago region added jobs, which fits into the overall improvement that we have seen in U.S. data over the past few weeks.

The combination of the strong Chicago PMI and Philly Fed reports suggest that manufacturing conditions have improved nationally.  The ISM manufacturing index is due for release next week and based upon the latest numbers, we expect a dollar positive report on the first trading day of 2010.  The expansion in the employment component of Chicago PMI also points to smaller job losses in the manufacturing sector which bodes well for next Friday's non-farm payrolls report. 

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Comments (7)

a_kapoor

December 30, 2009 at 10:47 AM ET

Hey Kathy,
Any idea why GBP is getting stronger this morning while Euro is falling at such a high pace ?

alexjbrandt

December 30, 2009 at 11:58 AM ET

If my memory is correct, the last time we saw this happen, the EUR/USD had a good rally the next day. I myself do not know what is driving the GBP/USD higher. It will be interesting to go back and see how many times the GBP/USD has rallied like this with the EUR/USD depreciating, and then see what happened in the EUR/USD the next day.

alexjbrandt

December 30, 2009 at 12:01 PM ET

hmm, well maye the EUR/USD will rally today instead lol.

yen-jan

December 31, 2009 at 01:48 AM ET

good call!

alexjbrandt

December 31, 2009 at 02:41 AM ET

Thank you :)

yen-jan

December 30, 2009 at 11:43 AM ET

Dramatic move in GBPJPY at what appears to be a key level.

fuji

December 30, 2009 at 11:56 AM ET

I think the GBP rebounce is due to tehcnical key support level bounce which I believe 15790 could be a strong level, imo.

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.