Risk-on trades are once again presumed to debilitate the US dollar today as European leaders struck a deal toward establishing a single banking supervisor for the Euro region in the ongoing summit in Brussels. Meanwhile, economic figures in the US continue to surprise as a gauge of manufacturing inclined larger-than-expected.
Earlier today, European leaders concurred to have a new supervisor for the Euro region’s banks operational next year, a step widely seen to pave the way for the bloc’s bailout fund to inject capital directly into struggling banks. The officials stated that the legislation to create the supervisor, which will be placed under the authority of the European Central Bank, should be completed by the end of the year. Direct recapitalization of banks by the ESM is widely seen as a crucial step in resolving the crisis as it will likely ease the burden of governments with weak public finances such as Spain being unable to support their banking systems. Hailing the development, French President Francois Hollande said that the worst is over, likely seeking to reassure investors that Europe is keeping up momentum to emerge from its financial crisis.
Over to the US, factory activity in the mid-Atlantic region expanded in October, snapping five months of contraction. The Philadelphia Federal Reserve Bank reported that its business activity index inclined from -1.9 points to 5.7 points this month, exceeding forecasts of a modest rise to 1.3 points. Although both new orders and employment still contracted, the report suggests the resilience of the factory sector, which became the cornerstone of the US economic recovery. Likewise, a separate gauge of US economic activity designed to provide signals over future conditions posted a solid gain in September, recovering after a decline in August. The Conference Board reported that its index of leading indicators expanded by 0.6 percent last month after falling 0.4 percent in August. The strength stemmed from a considerable increase in building permits which climbed to a four-year high during the month.
Today, the National Association of Realtors is awaited to report that Existing Home Sales edged lower in September after reaching a two-year high in August. The annualized number of residential buildings that were sold last month is believed to have come in at 4.73 Million last month from 4.82 Million in August. Nonetheless, the report is unlikely to cast any doubt on views that the housing market has turned the corner, with low mortgage rates spurring buyers to enter the market. Likewise, builder confidence in turn has improved while home prices have elevated. Considering these developments ameliorating confidence, a long position favoring the Aussie is advised today.
For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx Forex Trading Solutions