Article by AlgosysFx Forex Trading Solutions
On additional signs that the US economy remains rather fragile as the global economic backdrop deteriorates, the US dollar is foreseen to gain alongside its Aussie counterpart today on risk-off trades. Gauges of business spending and housing are believed to underscore the tepid pace of growth the world’s largest economy is apt to undergo in the coming months. Meanwhile, European debt jitters are presumed to heighten further as the markets nervously await developments out of Spain.
Economists say that a slump in demand for aircrafts and slowing business investment likely drove durable goods orders to plunge by its fastest rate since January 2009. Total bookings for goods meant to last at least three years are estimated to have dropped by 4.7 percent in August, offsetting the strong 4.1 percent gain in the previous month. On the positive side, Core Durable Goods Orders are presumed to have gained 0.2 percent, modestly recovering from the 0.6 percent drop recorded in July. According to economists the report will likely underline cautious spending among businesses in response to growing signs of cooling global growth and the unsettles budget situation in the US. Similarly, slowing growth from Europe to China is also hampering exports, another headwind for American manufacturers.
Meanwhile, despite encouraging trends in the housing market recently, today’s Pending Home Sales report is deemed to dampen optimism over the sector. The National Association of Realtors is awaited to report that the number of homes under contract to be sold dipped by 0.4 percent in August, turning around from the 2.4 percent rise in the prior month. Although the figure is unlikely to suggest that housing is once again easing, the report could temper positive expectations for the housing recovery. As a forward-looking indicator, a decline in pending home sales indicates weaker construction activity in the future. A sluggish labor market is deemed to have deterred demand for homes during the month. The US Labor Department is awaited to disclose that Unemployment Claims came in at 378,000 in the previous week, slightly lower than the 382,000 count registered in the prior week. Economists say that with jobless claims at their current levels, September could be another month of lackluster job growth. Given such downbeat economic reports from the US, the appeal of the safe haven Greenback is presumed to incline.
Meanwhile, Spain is currently at the front and center of the European debt crisis as investors fear that Madrid cannot control its finances and that Prime Minister Mariano Rajoy lacks the political power to take unpopular measures. Demonstrators gathered near Parliament in Madrid yesterday for a second day of austerity strikes, leaving borrowing costs to rise above 6 percent for the first time since September 18. Today, Rajoy is set to present his 2013 austerity budget which could be a precursor to seeking a sovereign bailout, potentially activating the European Central Bank’s bond-buying scheme. Analysts warn, however, that increasing pressure from protesters could limit the government’s resolve. Considering these, a short position is recommended for the AUD/USD today.
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