A weaker US dollar is foreseen opposite the Australian dollar today as gauges from the housing, manufacturing and employment sectors in the US are seen to further highlight the improving prospects for the world’s largest economy. Yesterday, the Federal Reserve reiterated its commitment to continue with its asset purchases until unemployment improves significantly.
Federal Reserve officials held steady on their new stimulus program, opting to launch no new initiatives while saying there has been some improvement in household spending and an uptick in inflation since the scheme began last month. In a statement following its two-day meeting, the FOMC left short-term interest rates unchanged and reaffirmed its plans to keep them at current levels at least through mid-2015 because of the ailing economy. Nonetheless, analysts say that the Fed offered a slightly more upbeat picture of the US economy, citing that the economy has continued to expand at a moderate pace in recent month. The central bank also deems that household spending has advanced a bit more quickly and that inflation had recently picked up. It also acknowledged that the housing market has shown signs of improvement, albeit from depressed levels.
Echoing this optimism, the Commerce Department reported yesterday that American demand for new homes inclined to its highest level in more than two years in September. New home sales rose 5.7percent to a seasonally adjusted 389,000 annual rate, the highest level since April 2010, in a sign that the real estate market is gaining steam. The report also revealed that the median price of a new home inclined 11.7 percent from a year ago. The rebound in the sector is being support by record-low mortgage rates, which have been pushed down by the Fed’s easy monetary policy stance. Meanwhile, the National Association of Realtors is awaited to disclose today that Pending Home Sales recovered last month to suggest that the recent strides in the sector are apt to continue. Pending home sales are estimated to have jumped by 2.3 percent in September following the 2.6 percent fall recorded in the previous month. On encouraging views that the housing market could provide a boost to growth, risk-on trades are presumed to dominate today.
Meanwhile, improved labor prospects are deemed to further advance the amelioration in the housing and retail sectors. The number of individuals claiming unemployment-related benefits is projected to have dipped from 388,000 to 371,000 in the previous week, suggesting that recent developments in the broader economy have caused an uptick in business confidence. Meanwhile, after registering their largest plunge in three years, orders for US durable goods likely inclined last month as demand for airplanes recovered. Analysts estimate that bookings for goods meant to last at least three years rose by 7.2 percent in September following the 13.2 percent drop in August. The core reading, which excludes transportation equipment, is believed to have mounted by 0.8 percent from the 1.6 percent fall previously. Although business investment is taking a hit from waning exports and fiscal uncertainty at home, the report suggests that the slowdown in manufacturing is not as deep as previously thought. Considering these positive trends for the world’s largest economy, buoyed market sentiment is seen to wane demand for the Greenback. Hence, a long position is advised today.
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