Release Explanation: The Philly Fed index is a survey of manufacturing activity in the Third Federal Reserve District (eastern Pennsylvania, southern New Jersey, and Delaware). It attempts to index economic activity by polling participants in regards to employment, working hours, new and unfilled orders, shipments inventories, delivery times, prices paid, and prices received. With the Northeast being a major hub of manufacturing activity, a stronger Philly Fed index is suggestive of future economic growth in the area.

GDP is directly affected by the manufacturing activity in the country, of which the Philadelphia region is a major component off. Durable goods and other releases such as Industrial output can be affected by the Philly Fed. The currency may experience a slight movement on the release, but the significance of the data will be filtered down to Durable Goods and GDP, where the impact may be more severe.

Trade Desk Thoughts: According the Federal Reserve Bank of Philadelphia, region's manufacturing sector continued to contract in March. While the region's manufacturing executives continue to expect some recovery over the next six months, most indicators of future activity fell this month. Firms expect employment losses to continue, and plans for capital spending continue to be reduced.

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, rose to -35.0 this month from -41.3 in February. Last month's reading was the lowest since October 1990.

Continued weakness was evident in all of the broad indicators this month. The survey's current new orders index declined nearly 10 points, to -40.7, its lowest reading since July 1980. The shipments index increased six points, but this follows a record low in February. The survey's current inventory index declined precipitously this month, from -24.3 to -55.6, its lowest reading in the history of the survey.

The current employment index fell for the sixth consecutive month, declining six points, to -52.0, its lowest reading in the history of the survey. Fifty-two percent of firms reported a decrease in employment this month, and no firms reported increases. The average workweek index improved 13 points, but it remains at a low reading of -31.6.

For the fifth consecutive month, firms reported declines in the prices paid for inputs and the prices received for their own manufactured goods. The prices paid index decreased to a record low reading of -31.3 this month.

The future general activity index remained positive for the third consecutive month but decreased slightly, from 15.9 in February to 14.5 this month. The indexes for future new orders and shipments also decreased but by a larger amount; each fell 12 points.

The future employment index remained negative for the sixth consecutive month and was virtually unchanged from its reading last month. Thirty percent of the firms expect employment to decline over the next six months; only 13% expect employment to increase.

Forex Technical Reaction: Stocks fell after the report was released and the dollar gained marginally on the higher-yielding currencies while it declined vs. the yen.