Dec 27 2007
US Durable Goods Data On Tap
Yesterday most of the global financial markets were still closed for the observance of the Boxing Day holiday. Therefore there was very low liquidity in the Forex market, as many key market players were unavailable to trade. Nevertheless, there was some sharp volatility mainly involving the greenback versus the EUR and JPY. The main news yesterday was the release of the National Home Price Index Composite-20, which measures the annual change in the average price of a single-family home in 20 metropolitan areas. This Index was expected to release at -5.6%, but it surprised on the downside coming in at -6.1%. Therefore the deterioration of U.S home prices has now accelerated to record levels. This negative data once again raised investors concerns over the fledgling housing sector. At the moment U.S consumers are struggling to finance their mortgages and so the number of unsold homes is increasing. Therefore the negative housing data should continue in the months to come, until the oversupply in the housing market is balanced out. With this in mind, many analysts believe that the greenback will continue to broadly depreciate in 2008 as credit woes resurface and signs of a U.S. economic slowdown increase. On the back of this renewed negative dollar sentiment, the EUR gained over a hundred pips against the greenback, rising above the 1.4500 level for the first time in over two weeks. On the other hand, the greenback gained some ground against the JPY on Monday as stocks were higher in thin pre- holiday trading in the U.S, resulting in an increased risk appetite among investors which drove carry trades. However the greenback did slip slightly against the JPY yesterday before recouping its lost ground and resuming its bullish trend
Looking ahead to today, we are expecting a string of key U.S data releases kicking off with the Durable Goods figures. This will be followed by the Unemployment Claims and Consumer Confidence figures. Traders will be closely following these figures, as due to the lack of liquidity if these figures spring a surprise then we could see some sharp volatility. The greenback should continue its bearish path against the EUR today, as it seems that the late holiday season purchasing spree by U.S consumers was not enough to boost this year’s Retail Sales figures and there are also renewed concerns regarding the housing sector. Therefore there is still a lot of negative sentiment surrounding the greenback heading into the New Year.
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