USD Slips As Chicago Fed National Activity Index Suggests Below-Trend Growth In March

By Trang Nguyen,

THETAKEAWAY: March Chicago FedNational Activity Index Fell Back to Negative Territory > Below-Trend Growthand Lessening Pressures on Inflation > USDTumble vs. Most of its Major Peers

The Chicago Fed National Activity Index, aweighted average of 85 economic indicators, deteriorated to minus 0.29 in March from a revised 0.07 in February , Federal Reserve Bank of Chicago reported today. A negative print indicated a below-trend growth and lessening pressures onfuture inflation last month . The February index was upwardly revised to 0.07 from an initial estimate of minus 0. 09 .

The three-month average, which provides a moreconsistent picture of national economic growth, plunged to 0.05 from February’s 0.37 . Though disappointingly falling back a negative territory for the first time in four months , three-month average figure has not signaled a possible recession in thenear future.

85 economic indicators that constructed theChicago Fed national index were drawn from four broad categories of data:1) production and income; 2) employment, unemployment and hours; 3)personal consumption and housing; and 4) sales, orders andinventories. March negative reading was a result of deteriorationin all four broad categories of indicator.

Production-related indicators made a negative contribution of 0.13 to March ’s reading with 0.2 percent loss in manufacturing production and no improvement in industrial production . Consumption and housing sector continued to slip to minus 0.28 from minus 0. 24 in the previous month , in which rise in housing permits partly offset decline in housing starts . Sales, orders a nd inventories category add 0.03 to the index last month after contributing 0.0 4 in February. In contrast, the unemployment ratedeclined from 8.3 percent in February to 8.2 percent in March andaverage weekly initial claims for unemployment insurance reached afour-year low.

USDJPY 1-minute Chart: April 26 ,2012

Chart createdusing Strategy Trader – Preparedby Trang Nguyen

The U.S. dollar loses ground versus most of itsmajor trading partner except its Canadian counterpart for thesecond day due to lingering effect from FOMC meeting yesterday . In the minutes following the dismal ChicagoFed National Activity Index report, the greenback immediatelyextended declines against its major peers. As seen from the1-minute USDJPY chart above, the reserve currency tumbles 25 pipsagainst the Japanese yen from 80.9 to 80.65. Obviously, the Chicago Fed national indexreading today reinforces the concerns about the slow recovery aswell as deteriorated manufacturing production and housing conditions in the world’s largest economy .

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email tnguyen@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/market_alert/2012/04/26/USD_Slips_as_Chicago_Fed_National_Activity_Index_Suggests_Below-Trend_Growth_in_March.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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