By CountingPips.com
US Dollar trades lower in forex trading, Stocks edge up
The US Dollar has been on the defensive across the board today while the U.S. stock markets have advanced on a busy news day. The American currency has been declining today versus the euro, British pound, Japanese yen, Canadian dollar, Swiss franc, Australian dollar and the New Zealand dollar, according to currency data by Oanda at 3:28 pm EST in the U.S. session.
The euro has mounted a comeback the last couple of days against the dollar after starting the week under heavy selling pressure due to the Greek debt crisis. The EUR/USD currency pair has traded as high as 1.3682 today from opening the day at 1.3536 and after touching a low of 1.3452 early on Thursday. The EUR/USD is currently trading close to this week’s opening exchange rate and could be on its way to reversing a six-week losing streak.
The US stock markets, meanwhile, have traded a bit higher today with the Dow Jones advancing by 20 points, the Nasdaq increasing over 5 points and the S&P 500 up by close to 3 points at the time of writing. Oil has climbed higher by $1.32 to trade at $79.49 while gold has gained by $10.50 to trade at the $1,118.30 per ounce level.
Today’s economic news showed that the U.S. economy expanded by more than originally estimated in the fourth quarter of 2009 and at the fastest pace in over 6 years, according to a release by the U.S. Commerce Department. The second government estimate showed that the U.S. Gross Domestic Product grew on an annualized basis by 5.9 percent in the October to December quarter following a real 2.2 percent growth rate in the third quarter. The previous estimate put the GDP advance at 5.7 percent.
A significant contributor to the gain in GDP for the fourth quarter was a slowdown in the cutbacks of business inventories. Inventories fell by just $16.9 billion in the fourth quarter after a decrease of $139 billion in the third quarter and a decrease of $160.2 billion in the second quarter. This slowdown in the slashing of inventories accounted for adding approximately 3.9 percent to the GDP increase.
The fourth quarter GDP numbers advanced by the highest growth rate since 2003 and surpassed economic forecasts expecting the growth to meet the prior estimate at 5.7 percent.
GDP has now increased for two straight quarters after contracting for four quarters in a row. The economy declined by 6.4 percent in the first quarter of 2009 and by 0.7 percent in the second quarter before the third quarter’s 2.2 percent rise. Overall for the calendar year of 2009, GDP decreased by 2.4 percent following a 0.4 percent increase for 2008 and a 2.1 percent growth rate in 2007.
Also contributing to the economic expansion was an increase in consumer spending which makes up roughly two-thirds of U.S. economic activity. Consumer spending rose by 1.7 percent (vs 2.0% in previous release) in the quarter after an increase of 2.8 percent in the third quarter.
A gain in exports contributed positively to the GDP numbers as exports of goods and services increased by 22.4 percent (vs 18.1% previous release) in the quarter while imports advanced by 15.3 percent.
Existing-Home Sales drop for second straight month
Also released today, the U.S. existing-homes sales data fell more than expected for the month of January, according to the monthly report produced by the National Association of Realtors (NAR). The NAR report showed that existing-home sales including single family homes, co-ops and townhouses fell by 7.2 percent in January to a seasonally adjusted annual rate of 5.05 million units. Despite the monthly decline, existing-home sales increased by 11.5 percent an annual basis from the January 2009 level.
Market forecasters had predicted the sales data would rise by 0.9 percent in January to a 5.50 million unit sales pace. December’s existing-homes sales had decreased by a revised 16.2 percent to a 5.44 million home rate.
The median sales price for existing homes was $164,700 in January while total housing inventory decreased in January by 0.5 percent to a total of 3.27 million homes.
NAR chief economist Lawrence Yun commented in the report about the sales figures, “Most of the completed deals in January were based on contracts in November and December. People who got into the market after the home buyer tax credit was extended in November have only recently started to offer contracts, so it will take a couple months to close those sales. Still, the latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery.”