Article by AlgosysFx Forex Trading Solutions
The US dollar is foreseen to lose ground opposite the Australian dollar today as upbeat figures from the world’s largest economy are believed to heighten risk-taking today. Yesterday, housing data revealed that the real estate sector is indeed making a sustained recovery, boosting prospects for the US economy. Meanwhile, with views emerging that a rebound is in the offing for the Chinese economy to end the year despite slower annual growth in Q3, the Aussie is deemed to rise.
Any doubts that the US housing market has turned the corner have seemingly been erased by yesterday’s encouraging Housing Starts and Building Permits reports. The Commerce Department said that housing starts inclined in September at its fastest rate since July 2008, increasing by 15 percent to an annual rate of 872,000. Applications for building permits, an indication of future construction, rose by nearly 12 percent to 894,000, also the best reading since July 2008. Low mortgages have spurred more Americans to enter the housing market, and the surge in construction suggests that builders believe the housing recovery is sustainable. Although construction activity is still well below the roughly 1.5 Million rate consistent with a healthy market, activity is now 82.5 percent higher than the recession low hit in April 2009. The figures follow previous reports which reveal builder confidence reaching a six-year high this month, sales of new and previously owned homes steadily improving, and home prices starting to show consistent gains.
Today, the release of the Philly Fed Manufacturing Index is seen to extend the optimism over the US economy. After 5 months of contraction, factory conditions in the Philadelphia region are estimated to have expanded this month. The index is forecast to rise from -1.9 points to 1.3 points this month, in a positive signal that domestic demand is offsetting soft demand from abroad amid the global slowdown. It also signifies that the factory sector, the cornerstone of the economic recovery is also on the mend. Meanwhile, the expected increase in jobless claims could provide a slight dampener to sentiment. After falling to 339,000, its lowest level in four years, the number of individuals claiming jobless benefits is seen to have inclined back to 367,000 last week. Nevertheless, with the US economy widely believed to end the year on a rather strong note, risk appetites are seen to be enhanced.
Lending additional support to market sentiment today are stronger-than-expected reports from China. The Chinese economy expanded by 7.4 percent in the September quarter, marking its seventh consecutive slowdown in growth. Despite this, the markets took solace in the fact that the figure matched expectations and that other reports seemingly signify that the worst could be over. Fixed-asset investment increased by 20.5 percent in January-September from a year earlier, ahead of the 20.2 percent consensus forecast, while Retail Sales also beat projections by expanding 14.2 percent on an annual basis. Growth in factory output came in at 9.2 percent, stronger than the 8.9 percent reading for August. With the export outlook for Australia brightening amid views that the Chinese economy could recover in Q4, the Aussie is deemed to strengthen. Hence, a long position is advised today.
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