FOMC Meeting Dominates in a Week Full of Housing Data
International Trading
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Sunday, September 19, 2010
, Posted by Usman Ali Minhas at 8:55 AM
Investors all around the globe will be waiting to hear what the Federal Open Market Committee has to say over the current economic situation or the outlook for the U.S. economy, while some investors expect the FOMC to announce further easing, meanwhile, data from the housing market will be also dominating the week amid expectations of a slight improvement.
Let us start with the FOMC rate decision, the FOMC is widely expected to leave the benchmark interest rates unchanged at a record low between 0.00% and 0.25%, however, some market participants expect the Fed to announce further easing in their monetary policy, where expectations signal that the Fed could announce further quantitative easing through purchasing U.S. Treasuries, also the Fed could strengthen their tone and further confirm their Dovish stance, or the Fed could reduce the rate they pay on excess reserves in order to encourage banks to lend money to consumers.
However, I really doubt that the Fed will announce any easing measures throughout this meeting, since conditions are still somewhat the same and nothing has changed really over the past period, where the recovery is indeed losing some pace, yet the economy continues to expand, and recent data suggested that growth in the third quarter might be stronger than that reported in the second quarter.
Bernanke also signaled that it’s unlikely that the Fed will undertake further easing at this moment, since inflation remains well under control and inflation expectations remain rather stable, while consumer spending though week but it continues to rise over a moderate pace, also, overall conditions in financial markets continue to improve, and unless the Fed have solid evidence that the economy is slowing drastically and might even contract; I don’t see a reason for them to take further easing.
Moving on to the housing market, as this week is full of fundamentals from the struggling sector, where the housing starts and building permits are expected to show moderate rise in activity, where activity in the housing market has been under huge pressure amid elevated unemployment, tightened credit conditions, and record foreclosures.
Nevertheless, activity in the housing market is highly unstable at the moment, where expectations signal that we should witness a noticeable increase in existing and new home sales over the month of August after both sales dropped drastically back in July.
The housing market still needs some time before it can recover fully from the current weak conditions, however, some encouraging signs continue to surface every now and then, which means that we shouldn’t be too pessimistic over the outlook for housing market activities, since overall economic conditions are still improving, I’m just saying the housing market will probably need till next year before we can witness a strong rebound in activities.
The leading indicators will be released for the month of August, where expectations signal that the leading indicators will continue to expand over a weak pace, which signals that although we expect growth in the third quarter to be stronger than that of the third, but we also expect growth to remain weak throughout this year.
Meanwhile, the durable goods orders will be released for the month of August, where the durable goods orders are expected to show contraction, nevertheless, that doesn’t exclude the fact that activity somewhat improved in August, and that could be a positive sign for the outlook.
Stock markets fluctuated throughout last week, and we should expect this fluctuation to prevail over the course of this week as well, at least until investors know exactly what the Fed have in mind, while the U.S. dollar has been losing value against major currencies, but we should expect the dollar to rise back after the FOMC meeting, since we don’t expect the FOMC to announce further easing measures, and the main reason behind the dollar’s fall is indeed expectations of further quantitative easing, which weighed down heavily on the U.S. dollar
Visiter
Web stat
