economic analysis

Forex Video News: Market Outlook for March 2nd-7th 2008

Economic Releases for Friday Feb 29th 2008. This will be a big day for trading opportunities.

Video of the economic releases for Tuesday February 12th.

The existing home sales figure for the month declined once again (see 1st chart).   However, the supply of existing homes for sale expressed in terms of months declined to 9.6 months, down from a high two months ago of 10.7 months.  The decline is supply is needed to stabalize the housing market and the financial markets.  This movement is a step in the right direction but does not mean the housing market is out of the woods.  A more normal level would be around 7 months.

The low Initial Claims data is confounding given the reports and expectations for the economy.  However, the recent data strength may be more about faulty seasonals than overlall strength in employment.

Economic figures like the Initial Claims have seasonal factors in an attempt to smooth out the swings due to things such as holidays.  The Christmas/New Year period for instance shows large movements in claims historically.  The chart below shows the spikes in unadjusted Initial Claims over the last 3 years.

The market is quieting down as Europe and London has gone home for the weekend. 

The EURUSD is between a relatively narrow range at 1.4636 and 1.4695.  The EURUSD has been supported by buyers in EURGBP today as it soared back above 0.7000 (high of 0.7016) from a closing level of 0.6963.  The pair is running into resistance at this level (0.7026 is the high for the year).

It was a busy week as plenty of news and events kept the markets hopping, culminating in the employment report today. 

Honestly, if I was told that GDP would be over 3.0%, and NFP would be up 166,000, I would have bet a million dollars the dollar would have been at least a touch higher from the previous week, even if the Fed did lower rates by 25 basis points. 

Clearly, the Fed sees what the market sees.  A lower dollar has the potential to increase inflation.  Oil is up.  Commodities are up.  Of course there is concern for inflation.  However, domestic growth is slow and risks domestically can be a problem if housing prices get hurt more. That should help inflation. 

Next week is needless to say a big week. We will have key economic data released in the US, highlighted by the 1st cut of the Q3 GDP, the Chicago PMI, Construction Spending, and the Employment Cost Index for the 3rd quarter on Wednesday, October 31st. On Thursday there is Personal Income, Personal Consumption, and the Core PCE Deflator, along with the ISM Index for October. Friday brings the all important Non Farm Payroll.

Employment is the one bright light.  Although growth in employment is not stellar, it did rebound this month.  However, the inital claims last week showed a chink in the armour, climbing to 337,0