Drop in Consumer Prices and Weak Housing Drops US Stocks
Fundamental Archives |
Written by CMS Forex |
Nov 19 08 20:51 GMT |
Drop in Consumer Prices and Weak Housing Drops US Stocks
NZ Producer Prices Cool, But Less Than Expected
In new Zealand, Producer output prices decelerated in the 3rd quarter, showing a quarterly growth rate of 3.7% while producer input prices were at 2.8%. However, forecasts had called for an even bigger slowdown in these gauges. Fuel prices were the main culprit in driving up producers' prices for the period which should be expected to reverse in the 4th quarter.
AUS Leading Index Falls 1% in September
The leading index saw a very bleak -1.0% change on the month, as the Australian economy is facing difficult challenges in the face of an increasingly severe global slowdown that will affect demand for commodities. The domestic economy is also under pressure as stock prices plummeted and the housing market starts to soften. The poor economy has also put the breaks on job growth, which will cut into consumer spending.
AUD/USD - Aussie Falls from High Near 0.6590
In a speech today, RBA Governor Stevens said that "the biggest mistake we could make would be to talk ourselves into unnecessary economic weakness." There is a chance that Australia would be able to avoid a recession as it has more room to cut rates in order to support the economy that other developed nations. The Aussie-US Dollar pair stuck to its range seen the last two, reaching a high near 0.6590 at the NY open before retreating in later NY trading.
UK BoE Minutes Show Talk of Even Bigger Rate Cut
Meeting minutes today showed that the Bank of England considered an even bigger reduction in the benchmark interest rates than the 1.5% cut they announced on November 6th. In the end the Monetary Policy Committee voted 9-0 to lower rates to 3% from 4.5% as they did not want to spook markets, or hurt their credibility in the markets.
UK CBI Shows Weak Order Bookings
A second release from the UK showed that the outlook for manufacturing output in the next three months is the weakest for nearly thirty years. The latest CBI Industrial Trends Survey reveals that order bookings remain near their lowest levels since 2003. There were 38% more respondents saying their total orders were below normal.
GBP/USD - Pound Falls to Dollar After Rallying to 1.5250
The Pound-Dollar pair broke above this week's resistance and climbed to 1.5250 at the NY open after a smaller rally in the European session. Usually talk of further rate cuts would hurt a currency, but the Pound was heavily oversold last week, and may be making up for it as a more aggressive Bank of England may be a positive sign to trying to revive the ailing economy. The climb to a one-week high gave some traders the opportunity to sell the Pound at a higher price bringing the Pound down during the rest of NY morning trading.
US Consumer Price Index Down 1% in October
US consumer prices fell by the most in 61 years, dropping 1% in October, a bigger fall than predicted by economists. The main catalyst for the decline was an 8.6% reduction in the price of energy, though food prices ticked up 0.3%. Core prices, which exclude both energy and food, fell 0.1%. Combined with Tuesday's report showing producer prices falling by 2.8%, it is evident that inflation is on the retreat during this economic slowdown and that the Fed will not feel restrained in cutting rates further if necessary.
US Housing Starts and Permits Fall 4.5% and 12% Respectively
Housing starts fell for the fourth straight month, decreasing 4.5% to a seasonally adjusted 791,000 annual rate, which is a record low. Building permits, an indicator of future construction fell 12% to a 708,000 annual rate. With home sales and prices falling, there is less incentive for home builders to start new constructions. One benefit is that this may thin out inventories, as excess supply is making it harder for home prices to stabilize.
EUR/USD - Euro Jumps on US Data, Then Retreats in the Face of Weak US Stocks
The Euro-Dollar had an interesting response following the data as the Euro rose 160 pips to test 1.2814, breaking out of a consolidation pattern seen the last 3 sessions. However those gains were cut down quickly as the pair ran into resistance from Friday. US stocks fell yet again as today's inflation and housing reports mixed with worry over the fate of the US auto industry. In general global stocks were down today, giving the forex markets there latest jolt of risk aversion.
CAN Leading Index Falls 0.4%
In Canada, the leading index fell 0.4% in October, after a 0.3% drop in September. However most of the decline was a result of falling stock prices, which fell 17%. Other components held up, especially consumer spending which is a sharp contrast from the US.
USD/CAD - Loonie Pressured By Risk Aversion
The US Dollar-Canadian Dollar pair saw very choppy action in NY trading, though it stuck to a relatively small 120 pip range for the day. Overall, with global stocks weaker and commodity prices down the Loonie was pressured and tested recent resistance at the 1.2450 level.
Tonight's and Tomorrow's Releases
Looking at some upcoming releases, Japan posts its trade balance data tonight. Overnight, Germany releases producer prices, Switzerland posts its trade balance, and the UK reveals data on retail sales and government borrowing.
Tomorrow, the US will post its weekly jobless claims, Philly fed index, and leading indicators. Canada will reveal two releases as well, wholesale sales and data on company profits.
