Sunday, November 29, 2015

Holiday week saw good U.S. economic results | Heat builds for rate rise in new month

In a holiday shortened week last week due to Thanksgiving in the U.S., a number of reports came in with better than expected results, even if their timing was skewed from the normal release days as a result of the holiday (we have come to expect certain potential Forex market movers, such as the Reuters / Univ of Michigan Consumer Sentiment index which normally comes on a Friday but was on Wednesday last week) to appear on their appointed days.

Durable Goods, purchases that are expected to have a longer life, got a boost last week, coming in much better than expected for October. They jumped 3.0% after falling 0.8% in the previous period. The outcome was as a result of a dramatic increase in the supply of non-defence aircraft and parts. They jumped by no less than 81.0%, after falling 32.3% previously. Non-defence capital goods, which reflect consumer spending, were up by 0.4%, which is also a good indicator for the state of the economy.

Separately, New Home Sales were also up strongly in October. New homes are more important for the economy than existing homes, so the good news for the Federal Reserve continues here also.

Heat builds for rate rise in new month

All of the above feeds into the by now widely held belief by market participants that there will indeed be a rise in interest rates in the U.S. at the next monetary policy meeting of the Federal Reserve, which is due to take place on December 15th and 16th. So strong is this expectation now that it is not outside the bounds of possibility that the U.S. currency could be entering overbought territory, and we could be setting up for a classic “Buy the rumour, sell the news” type of scenario.

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