Forex Outlook on the Major Events: 30 Dec – 2 Jan

Posted: December 30, 2013 in Uncategorized
Tags: , ,

After the holiday week ended up being not that quiet, with some big movements and new lows for the currency. Some highlights of this week are US Pending Home Sales, consumer confidence and unemployment claims. Let’s see the outlook on the major events closing 2013 and starting 2014.491be-1186133_602860789764394_1899045011_n
In the last days before the year ended, the US released a batch of positive indicators, backing the Fed’s decision to taper its asset purchase program just before the holidays. The first piece of good news came from durable goods orders, surging 3.5%, amid growing demand for a range of goods. The high reading was way above the 1.7% increase predicted by analysts. Meanwhile core durable goods orders also climbed above market consensus rising 1.2% in November after a 0.4% gain in the previous month. Another good reading came from the housing sector where new home sales reached a five-year high of a 464,000 annualized pace, following a revised 474,000 rate in October. The massive increase came despite the high mortgage rates and may be attributed to the improvement in the labor market conditions and the relatively low housing prices. The final piece of good news came from the labor market where the number of Americans filing new claims for unemployment benefits dropped 42,000 to a seasonally adjusted 338,000.Although claims tend to be volatile around the holiday season, the overall picture is encouraging and the US economy is ending 2013 in a positive note. Let’s start,

US Pending Home Sales: Monday, 15:00. Signed transactions for acquisitions of existing homes fell 0.6% in October posting the fifth straight monthly decline. Economists expected a 2.2% rise. On a yearly base the reading was down 1.6% from October 2012. The government partial shutdown contributed to this decline deterring potential buyers. However limited inventory and high mortgage rates continue to weigh on the housing sector. Pending home sales are expected to rise 1.1% this time.

Source National Association of Realtors (latest release)
Measures Change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction;
Usual Effect Actual > Forecast = Good for currency;
Frequency Released monthly, about 28 days after the month ends;
Next Release Jan 30, 2014
FF Notes This data is released about a week later than Existing Home Sales, but it’s more forward-looking as a contract is signed several weeks before the home is counted as sold;
Why Traders
Care
It’s a leading indicator of economic health because the sale of a home triggers a wide-reaching ripple effect. For example, renovations are done by the new owners, a mortgage is sold by the financing bank, and brokers are paid to execute the transaction;
Also Called Pending Resales;

 

US CB Consumer Confidence: Tuesday, 15:00. The Conference Board confidence index among U.S. consumers unexpectedly fell in November to a seven-month low, posting 70.4 points, following an upwardly revised reading of 72.4 in October. This decline came amid fresh concerns over the labor market outlook. Economists expected a minor drop to 72.2. The Conference Board’s barometer of consumer expectations for the next six months declined to 69.3, the lowest since March, from 72.2 a month earlier. A gauge of present conditions dropped to 72 from 72.6 in October. The slow pace of recovery in the US economy is a drag on consumer confidence, a pickup in employment conditions may spark household confidence in the coming months. Consumer Confidence  is expected to climb to76.5.

Source The Conference Board Inc. (latest release)
Measures Level of a composite index based on surveyed households;
Usual Effect Actual > Forecast = Good for currency;
Frequency Released monthly, on the last Tuesday of the current month;
Next Release Jan 28, 2014
Why Traders
Care
Financial confidence is a leading indicator of consumer spending, which accounts for a majority of overall economic activity;
Derived Via Survey of about 5,000 households which asks respondents to rate the relative level of current and future economic conditions including labor availability, business conditions, and overall economic situation;
Acro Expand The Conference Board (CB);

 

US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits declined by 42,000 last week to a seasonally adjusted 338,000, the biggest drop registered since November 2012. However seasonal volatility may still be blamed since figures around Thanksgiving, Christmas and New Year’s holidays tend to be unsteady. The four-week average increased 4,250 to 348,000. Nevertheless the Fed tapered its stimulus in December claiming the job market has improved. The economy expanded at a 4.1% annual pace from July through September, the fastest rate since late 2011 and much greater than previously expected. A further decline to 334,000 is expected now.

Source Department of Labor (latest release)
Measures The number of individuals who filed for unemployment insurance for the first time during the past week;
Usual Effect Actual < Forecast = Good for currency;
Frequency Released weekly, 5 days after the week ends;
Next Release Jan 9, 2014
FF Notes This is the nation’s earliest economic data. The market impact fluctuates from week to week – there tends to be more focus on the release when traders need to diagnose recent developments, or when the reading is at extremes;
Why Traders
Care
Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country’s monetary policy;
Also Called Jobless Claims, Initial Claims;

 

US ISM Manufacturing PMI: Thursday, 15:00. U.S. factory activity hit a 2-1/2-year high in November reaching 57.3 following 56.4 in the previous month amid pick up in construction spending in October. Following this release, Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York said US economic recovery is gaining momentum despite the fiscal headwinds and the tapering threat. The ISM report was in line with a separate index released by financial data firm Markit, suggesting a solid improvement in the manufacturing sector. Factory activity is expected to reach 56.8.

Source Institute for Supply Management (latest release)
Measures Level of a diffusion index based on surveyed purchasing managers in the manufacturing industry;
Usual Effect Actual > Forecast = Good for currency;
Frequency Released monthly, on the first business day after the month ends;
Next Release Feb 3, 2014
FF Notes Above 50.0 indicates industry expansion, below indicates contraction;
Why Traders
Care
It’s a leading indicator of economic health – businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy;
Derived Via Survey of about 400 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories;
Also Called Manufacturing ISM Report On Business;
Acro Expand The Institute for Supply Management (ISM), Purchasing Managers’ Index (PMI);
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Comments
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