Housing Starts Higher Than Expected, German PPI Reported Highest In 24 years... but does it change anything?
Another quiet day in the forex market since not much of fundamentals are released today. Highlight for the day would be the German PPI and the USD Housing Starts which directly influence the real estate industry in the United States. Home construction rose in May from a 13-month low as builders worked on backlogs of unfilled orders and used incentives to win new business in a slowing market. Housing starts rose a greater-than-expected 5 percent to an annual rate of 1.957 million from 1.863 million in April. Building permits, a sign of future construction, fell 2.1 percent to an annual rate of 1.932 million, the Commerce Department said today in Washington.
Rising borrowing costs are discouraging potential home- buyers. The average rate on a 30-year fixed mortgage hit a four- year high of 6.67 percent in the week ended June 2, according to McLean, Virginia-based Freddie Mac, the second-biggest purchaser of U.S. mortgages.Mortgage rates are likely to rise further as the Federal Reserve lifts the nation's benchmark lending rate to keep a lid on inflation. Policymakers will increase the federal funds target rate to 5.25 percent when they meet June 28-29, according to the median forecast in a Bloomberg News survey of economists."Given the slowing conditions in the housing market, spending for the construction of new housing is unlikely to be an important direct source of overall GDP growth this year, after having contributed close to one half a percentage point last year," Federal Reserve Governor Susan Bies said in a June 14 speech.
On the other side for the Euro zone... Producer price inflation in Germany, Europe's largest economy, last month accelerated to the fastest in almost 24 years, mainly led by higher energy costs. Goods from plastics to newsprint were 6.2 percent more expensive in May than a year earlier, compared with 6.1 percent more in April, the Federal Statistics Office in Wiesbaden said today. That's the most since June 1982. Economists expected a gain of 6.4 percent, according to the median of 34 forecasts in a Bloomberg News survey. From April, prices rose 0.1 percent. Higher costs are hurting retailers' margins. The Bloomberg Retail Purchasing Managers Index showed June 7 that an index measuring prices paid for goods intended for resale rose in May and margins fell to the lowest level for three months, ``which many attributed to higher purchasing costs,'' according to economic research firm NTC Economics Ltd., which did the survey.
I'm expecting the Fed to pause on interest rates after this month and totally contrary on the ECB where I'm expecting them to raise interest rates to at least 3% before the end of the year. The way of the ECB hiking the interest rates are not frequent-monthly based like the Fed. Most likely I'll be expecting another rate hike from the ECB in August or September. The market today is practically trading in 60 pips range where EUR/USD move in range of 1.2600 - 1.2540 and USD/CHF in 1.2440 - 1.2380. It's highly possible for the NY session today to end with a cross. I'm expecting a break very soon but the direction is highly uncertain. As for my analysis till for the Fed rate decision, I'm seeing that the Fed raising rates this month will not cause a great stir in the forex market, particularly in EUR/USD because everyone's expecting and it's fully priced in. Another 25 bps hike from the Fed from my view will cause the dollar to be sold due to the expected burden it will do to the current slow US economy. This reaction is based on the core CPI and CPI reports on the other day where the market reaction is negative on the dollar. Bernanke's speech after the hike would be crucial as he might signal a pause or being hawkish again on the interest rate. Either of this will mostly be viewed as bearish dollar. So according to my view, the next coming break will be mostly in the direction of the Euro.
No changes of trades were made today on my live account and I'm still testing out the new system on the demo. Results were unknown yet but I'm looking forward of using the new system as soon as possible. Hopefully it can generate more profit for me. My friend, Greg and I will be providing signal services very soon for all interested forex traders to aid them in trading. Wish us luck and may Forex God bless us...
``This increase is a dead-cat bounce,'' Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc., said before the report. ``It doesn't signal any change in trend. Housing's still got a long way to fall before it gets back to earth.''
Rising borrowing costs are discouraging potential home- buyers. The average rate on a 30-year fixed mortgage hit a four- year high of 6.67 percent in the week ended June 2, according to McLean, Virginia-based Freddie Mac, the second-biggest purchaser of U.S. mortgages.Mortgage rates are likely to rise further as the Federal Reserve lifts the nation's benchmark lending rate to keep a lid on inflation. Policymakers will increase the federal funds target rate to 5.25 percent when they meet June 28-29, according to the median forecast in a Bloomberg News survey of economists."Given the slowing conditions in the housing market, spending for the construction of new housing is unlikely to be an important direct source of overall GDP growth this year, after having contributed close to one half a percentage point last year," Federal Reserve Governor Susan Bies said in a June 14 speech.
On the other side for the Euro zone... Producer price inflation in Germany, Europe's largest economy, last month accelerated to the fastest in almost 24 years, mainly led by higher energy costs. Goods from plastics to newsprint were 6.2 percent more expensive in May than a year earlier, compared with 6.1 percent more in April, the Federal Statistics Office in Wiesbaden said today. That's the most since June 1982. Economists expected a gain of 6.4 percent, according to the median of 34 forecasts in a Bloomberg News survey. From April, prices rose 0.1 percent. Higher costs are hurting retailers' margins. The Bloomberg Retail Purchasing Managers Index showed June 7 that an index measuring prices paid for goods intended for resale rose in May and margins fell to the lowest level for three months, ``which many attributed to higher purchasing costs,'' according to economic research firm NTC Economics Ltd., which did the survey.
I'm expecting the Fed to pause on interest rates after this month and totally contrary on the ECB where I'm expecting them to raise interest rates to at least 3% before the end of the year. The way of the ECB hiking the interest rates are not frequent-monthly based like the Fed. Most likely I'll be expecting another rate hike from the ECB in August or September. The market today is practically trading in 60 pips range where EUR/USD move in range of 1.2600 - 1.2540 and USD/CHF in 1.2440 - 1.2380. It's highly possible for the NY session today to end with a cross. I'm expecting a break very soon but the direction is highly uncertain. As for my analysis till for the Fed rate decision, I'm seeing that the Fed raising rates this month will not cause a great stir in the forex market, particularly in EUR/USD because everyone's expecting and it's fully priced in. Another 25 bps hike from the Fed from my view will cause the dollar to be sold due to the expected burden it will do to the current slow US economy. This reaction is based on the core CPI and CPI reports on the other day where the market reaction is negative on the dollar. Bernanke's speech after the hike would be crucial as he might signal a pause or being hawkish again on the interest rate. Either of this will mostly be viewed as bearish dollar. So according to my view, the next coming break will be mostly in the direction of the Euro.
No changes of trades were made today on my live account and I'm still testing out the new system on the demo. Results were unknown yet but I'm looking forward of using the new system as soon as possible. Hopefully it can generate more profit for me. My friend, Greg and I will be providing signal services very soon for all interested forex traders to aid them in trading. Wish us luck and may Forex God bless us...
posted by 4xTrader at
11:27 AM
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