Sales of New Homes in U.S. Rose in April

Purchases of new houses rose in April for a second month as the market struggled to recover from a record low.

Sales climbed 7.3 percent to a 323,000 annual pace last month, figures from the Commerce Department showed today in Washington. The median estimate in a Bloomberg News survey of economists called for sales at a 300,000 annual rate. New houses sold at a 278,000 rate in February, matching the pace in August as the lowest in data going back to 1963.

Job gains and increased affordability may be starting to help underpin a housing market that’s lagged behind the rest of the economy. Nonetheless, the prospect that foreclosures will keep driving down property values means that buyers may continue to favor previously owned dwellings, indicating it will take years for builders like D.R. Horton Inc. to see a full recovery.

“We’re looking at a modest upward trend, with some bouncing around at this level,” said Bricklin Dwyer, an economist at BNP Paribas in New York. “Housing will bounce around near these levels in terms of new and existing sales, with a bit of further declines in prices. We should see a pickup later in the year.”

Another report today showed manufacturing, which led the economy out of the recession, may be cooling. The Federal Reserve Bank of Richmond’s factory index dropped to minus 6 this month, the lowest reading since April 2009. Negative numbers indicate manufacturing was shrinking.

Shares Climb

Stocks held earlier gains after the reports. The Standard & Poor’s 500 Index rose 0.4 percent to 1,323.11 at 10:27 a.m. in New York. The S&P Supercomposite Homebuilding Index climbed 0.9 percent.

Estimate in the Bloomberg survey of 75 economists ranged from 280,000 to 320,000. Sales in March were revised to a 301,000 annual rate from a 300,000 previously reported.

The median sales price increased 4.6 percent from the same month last year, to $217,900, today’s report showed.

The gain may reflect a change in the mix of sales to higher- priced homes in the West, where demand jumped 15 percent. The other three regions also saw purchases increase.

The supply of homes at the current sales rate dropped to 6.5 month’s worth in April, the lowest in a year, from 7.2 months in March. There were 175,000 new houses on the market at the end of April, the fewest since records began in 1963.

Executives Dour

Building executives are still concerned about the outlook. Demand for new houses will remain weak into next year, said Bill Wheat, chief financial officer of Fort Worth, Texas-based D.R. Horton Inc., the second-largest U.S. home builder by revenue. “We feel it could still be a struggle in 2012.”

Builders are cutting back as a result. Housing starts fell 11 percent in April to a 523,000 annual pace, the second-weakest reading since April 2009’s record low, figures from the Commerce Department showed last week.

One reason for the slump is growing interest from investors in buying distressed properties. Previously owned homes sold at a 5.05 million annual rate in April, down 0.8 percent from the prior month, data from the National Association of Realtors showed May 19. All-cash deals accounted for 31 percent of transactions, and distressed properties, including foreclosures and short sales, made up 37 percent, the group said.

As distressed transactions have played a bigger role, new- home sales have shrunk as a share of total sales. They accounted for just under 6 percent of the market in March, down from 16 percent at their peak in July 2005.

More Foreclosures

The supply of existing houses will probably remain an issue. CoreLogic Inc. in March estimated about 1.8 million homes were more than 90 days delinquent, in foreclosure or bank-owned, a so- called “shadow inventory” set to add to the unsold supply of 3.87 million previously owned homes already on the market.

Foreclosures have weighed on home prices. The S&P/Case- Shiller index of property values in 20 cities fell 3.3 percent in February from a year earlier, the biggest 12-month decrease since November 2009, the group said last month. The gauge is down 33 percent from its July 2006 peak.

In addition to the drop in values, persistent joblessness may be making some potential buyers hesitate. The 9 percent unemployment rate last month, almost two years into an economic recovery, compares with an average of 4.8 percent in the three years before the recession began.

Douglas Yearley Jr., chief executive officer at Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, last week said the spring home-selling season has been “disappointing” and that “people are still scared.”

Source: Bloomberg By Bob Willis

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No Much Improvement Of 5 Major Currency Along This Week

On 15-21 may 2011, many factors had influenced 5 major currency mover along this week both fundamental and technical. If you see last week, the movement of currency had dropped because of bad result. Now, i would like to give a summary so that the trader know more detail before taking a buying or selling decision.

Technical

EUR/USD, CPI y/y remain unchanged about 2,8%, Core CPI y/y was good result from 1,5% to 1,6%, German ZEW Economic Sentiment dropped from 4,8 (forecast) to 3,1 (actual), ZEW Economic Sentiment also dropped from 17,9 to 13,6, German PPI m/m rose from 0,6% to 1,0%, Current Account reduced from -5,7B to -4,7B

AUD/USD, Home Loans m/m reduced from 2,3% (forecast)  to -1,5% (actual), New Motor Vehicle Sales m/m was bad from 3,9% to -3,5%, Westpac Consumer Sentiment dropped from 1,2% to -1,3%, Wage Price Index q/q was not good result from 1,2% to 0,8%, MI Inflation Expectations 3,5% to 3,3%

GBP/USD, Rightmove HPI m/m 1,7% to 1,3%, CPI y/y rose slightly from 4,2% (forecast) to 4,5% (actual) , it was more than expectation, RPI y/y dropeed slightly from 5,3% to 5,2%, Claimant Count Change plunged from 0,4K to 12,4K, MPC Meeting Minutes was the same with previous result about 3-0-6, Average Earnings Index 3m/y increased from 2,0% to 2,3%, Nationwide Consumer Confidence dropped from 48 to 43, Retail Sales m/m rose more than expectation from 0,9% (forecast) to 1,1% (actual), CBI Industrial Order Expectations had a positive sign which reduce time by time to the better result -5 to -2

USD/JPY, Core Machinery Orders m/m -9,7% to 2,9%, Tertiary Industry Activity m/m -5,4% to -6,0%, Prelim GDP q/q -0,5% to -0,9%, Prelim GDP Price Index y/y rose slightly from -1,9% (actual)to -1,6% (previous), Overnight Call Rate remain unchanged about <0,10%

USD/CHF, no have something high impact of indicator for this week

 

Fundamental

Firstly we look at what fundamental factor will influence EUR currency, the crisis in the eurozone and global economic imbalances, should be recognised," says ZEW President Prof. Dr. Dr. h.c. mult. Wolfgang Franz. the financial market experts consider a further increase of the economic momentum to be unlikely. Moreover, mixed signals regarding the state of the U.S. economy as well as a weaker outlook for the Chinese economy might have dampened expectations  

For AUD currency, the trader must look at what had been released from the Monetary Policy Meeting of the Reserve Bank Board

There have many fundamental factors which influence along this week for GBP pound like making higher sales tax and increase in energy as well as import prices. While King said inflation is likely to rise further in the next few months, he sees it easing toward the bank’s 2 percent target next year. The central bank signaled last week it may need to raise the key interest rate from a record low to control “uncomfortably high” price growth. bring inflation back to the target quickly risks generating undesirable volatility in output and would increase the chances of undershooting the target in the medium term,” King said. The price gains on the month and the year were led by costs for transport as well as alcohol and tobacco 

Some fundamental factors showed for (JPY)yen currency mover caused by Quake Tsunami, this disaster become the most influence for Japan economy disruptions like factory shutdowns, power shortages and supply-chain as well as consumers to cut back spending. Meanwhile, The BOJ board decided earlier on Friday to keep monetary policy steady in a sign that a first-quarter economic slump had not changed the central bank's view that growth will pick up around autumn . Deputy Governor Kiyohiko Nishimura dropped his proposal to loosen policy further with an expansion of the central bank's asset-buying scheme. However, overseas economic growth remains strong and supply constraints are easing at a pace that the central bank had forecast last month. 

No much data can be found for swiss franc (CHF) in this week, the factor that the trader must pay attention is the failure problem of big bank will negatively impact Switzerland economy. The state is trying to rescue a company by bail out some additional fund and balanced package of measures for Parliament's consideration can help reducing the problem in Switzerland.

As a result, if we look all 5 major currency in this week showed a good sign but the improvement was not too much, it was caused by some bad news of fundamental factor. The red color above show the trader must watch and pay attention because these kind of indicator had given a high impact to the currency mover. Hopefully, this summary can help you guys to determine in the coming week.

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Good Sign of Jobless Claims in U.S Fall More Than Forecast

In this week, one of indicator which has a high impact is “unemployment rate”. This indicator will influence US currency mover and bring an effect  into economic condition in the coming week. If we look at the result from forexfactory, jobless claims fell into actual result about 409.000 figured out by labor department U.S, this was more than forecast about 421.000. Moreover, for two previous week has decreased gradually approximately 65.000 in may.

Some of factors that give impact to unemployment rate indicator can be vary. Labor market is the important thing that U.S must maintain because the effect of fluctuate unemployment rate will influence economic in the coming years. The most influence reason from falling of jobless claim is declining firings and gains in hiring, this are definitely helping sustain consumer spending, payrolls have climbed for seven consecutive months even though there have an increase costs of both food and fuel. High fuel costs are among reasons consumers are limiting purchases for people especially people who have no job.

Another reason is because of late school holiday in New York, a new emergency benefits program in Oregon and auto shutdowns caused by the disaster in Japan, the Labor Department has said. Flooding in the South hasn’t been a significant influence so far on the number of applications, the department official said today. However, no much special factors affecting and the median forecast was based on a survey of 49 economists but the continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

While the U.S. economy is showing some signs of improvement, we expect the recovery will continue to be slow and uneven.” Job market conditions had “continued to improve time by time. Beside that, Federal Reserve Bank of Cleveland President Sandra Pianalto said in a May 11 speech in Cincinnati. “I expect it could take about five years for the unemployment rate to reach its longer-run sustainable rate of 5.5 to 6 percent

The question is what relation between unemployment rate with currency mover? Of course between both of them have a strong relation which Labor market condition is correlated with consumer spending, let see that if unemployment rate dropped, means that many people get job which will be able to earn money eventually right so this can lead people to spend their money for household need. As a result, consumer spending raise and help US currency become better toward other currency. That is why the trader should consider unemployment rate indicator because of having a high impact into currency before they “buy” or “Sell” it. All are logic and make sense.

Source: Bloomberg

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Japan Machine Orders Unexpectedly Rose in March, Withstanding Quake Impact

Japan’s machinery orders unexpectedly rose even amid factory shutdowns, power shortages and supply- chain disruptions caused by a record earthquake. 

Factory orders rose 2.9 percent in March from February, when they dropped a revised 1.9 percent, the Cabinet Office said today in Tokyo. Orders, an indicator of capital spending in three to six months, were projected to fall 10 percent, according to the median forecast of 24 economists surveyed by Bloomberg News. 

The report bolsters the view that the world’s third-biggest economy is regaining momentum after the earthquake and tsunami that left more than 24,000 dead or missing and caused a nuclear radiation crisis. Tokyo-based Hitachi Construction Machinery Co., the world’s biggest maker of giant excavators, said it expects to be back to full production capacity as early as this week. 

“We thought it was too soon for companies to get their reconstruction plans in place, but this shows that they were already preparing to repair their facilities in March,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo. “Japanese manufacturing’s going to be back earlier than we had expected, and we’ll soon start to see capital spending boosts as well.” 

The yen traded at 81.03 per dollar at 10:57 a.m. in Tokyo, and the Nikkei 225 Stock Average fell 0.6 percent to 9,592.71.

Restrictions Relaxed

The government is asking companies and households to restrict power use by 15 percent this summer, less than its earlier prediction that savings of at least 20 percent would be necessary. Tokyo Electric Power Co. said on May 13 it plans to raise its power capacity to 56.2 million kilowatts by the end of August, 94 percent of last summer’s peak. 

Companies surveyed by the government forecast orders will increase 10 percent in the three months ending June 30, the report showed, which would be the biggest advance since 1989. From a year earlier, machinery orders rose 6.8 percent in March, today’s report showed. 

Production at five Hitachi Construction plants in Ibaraki prefecture, north of Tokyo, will probably return to 100 percent capacity this week, Chief Executive Officer Michijiro Kikawa said in an interview. Output in late April dipped to 60 percent of capacity, he said. 

“We still face uncertainties about procurement of some parts,” Kikawa, 63, said on May 11. “But things are far better.”

Output Increases

A government report showed last month that companies plan to increase factory output 3.9 percent in April and 2.7 percent in May, after a record decline in March. 

Nissan Motor Co.’s net income was 30.8 billion yen ($380 million) for the three months ended March 31, beating the 23 billion yen average of five analysts’ estimates compiled by Bloomberg. 

Japan’s economy probably contracted at an annual 2 percent pace in the three months ended March 31, according to the median estimate of 22 economists surveyed by the Bloomberg News. That would be the first time the economy shrank for two straight quarters since the global financial crisis. The report will be released May 19. 

“The level of economic activity may already be on the mend,” Hiroshi Shiraishi, an economist at BNP Paribas SA in Tokyo, said before the report. “With the outlook for power supply this summer so much better than before, it now seems likely that the economy will continue trending higher.”

Better Than Expected

Economic and Fiscal Policy Minister Kaoru Yosano last week expressed optimism about a turnaround, saying that the disaster’s effect on output was “smaller than first thought.” 

Prime Minister Naoto Kan’s administration plans a second extra budget to pay for reconstruction, following an initial 4 trillion yen ($50 billion) package that it says may create about 200,000 jobs. The government in March estimated that damage from the disaster may swell to as high as 25 trillion yen. 

Companies said it’s hard to predict how the earthquake will affect machine orders in coming months, said Minoru Masujima, head of statistics at the Cabinet Office. 

“Given the current state of the economy after the quake, corporate earnings will likely deteriorate toward the July- September period and growth expectations are low,” Hiroshi Watanabe, an economist at the Daiwa Institute of Research in Tokyo. “We should stay cautious about the outlook for capital spending.”

Producer Prices

Japan’s producer prices rose 2.5 percent in April from a year earlier, the biggest jump since October 2008, a separate report released by the Bank of Japan showed in Tokyo today. The median estimate of 20 economists surveyed by Bloomberg News was for a 2.1 percent increase. 

The central bank will “carefully monitor” whether sustained gains in oil gains will spur inflation expectations, Governor Masaaki Shirakawa said on April 28. The March 11 earthquake may only have a small effect on Japan’s prices should longer-term inflation expectations remain stable, the bank said in a report released last week. 

Source: Bloomberg By Keiko Ujikane 

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Housing Finance, Australia, Mar 2011

Value of Dwellings Financed

The total value of dwelling commitments excluding alterations and additions (trend) fell 1.6% in March 2011 compared with February 2011 and the seasonally adjusted series fell 0.1% in March 2011.

The total value of owner occupied housing commitments (trend) fell 1.7% (down $237m) in March 2011, following a fall of 1.7% in February 2011. Falls were recorded in commitments for the purchase of established dwellings (down $187m, 1.6%), the purchase of new dwellings (down $32m, 4.8%) and the construction of dwellings (down $17m, 1.4%). The seasonally adjusted series for the value of owner occupied commitments fell 1.1% in March 2011.

The total value of investment housing commitments (trend) fell 1.3% (down $85m) in March 2011 compared with February 2011, following a fall of 1.3% in February 2011. Falls were recorded in commitments for the purchase of dwellings by individuals for rent or resale (down $96m, 1.8%) and the construction of dwellings for rent or resale (down $2m, 0.5%), while commitments for the purchase of dwellings by others for rent or resale rose (up $13m, 2.0%). The value of investment housing commitments seasonally adjusted rose 2.1% in March 2011.

INVESTMENT HOUSING - TOTAL

Number of Owner Occupied Dwellings Financed

The number of owner occupied housing commitments (trend) fell (down 957, 2.0%) in March 2011 compared with February 2011. Falls were recorded in commitments for the purchase of established dwellings excluding refinancing (down 538, 2.1%), the refinancing of established dwellings (down 230, 1.5%), the purchase of new dwellings (down 112, 5.6%) and the construction of dwellings (down 76, 1.6%). The seasonally adjusted estimate for the total number of owner occupied housing commitments fell 1.5% in March 2011.

Number of Owner Occupied Dwellings Financed - State

Between February 2011 and March 2011, the number of owner occupied housing commitments (trend) fell in all states with Queensland (down 267, 3.2%), New South Wales (down 248, 1.7%), Victoria (down 175, 1.3%), South Australia (down 51, 1.4%), Western Australia (down 31, 0.6%), the Australian Capital Territory (down 19, 1.9%), Tasmania (down 12, 1.2%) and the Northern Territory (down 1, 0.4%). The seasonally adjusted estimates fell in all states except New South Wales (up 213, 1.5%), Western Australia (up 115, 2.1%) and the Northern Territory (up 8, 2.7%).


First Home Buyer Commitments

In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose from 14.9% in February 2011 to 16.0% in March 2011. Between February 2011 and March 2011, the average loan size for first home buyers rose $2,500 to $279,500. The average loan size for all owner occupied housing commitments rose $4,000 to $285,500 for the same period.


Number of Owner Occupied Dwellings Financed Excluding Refinancing

The number of owner occupied housing commitments excluding refinancing (trend) fell 2.3% in March 2011 compared with February 2011, following a fall of 2.3% in February 2011. The seasonally adjusted series fell 0.9% in March 2011.

PURPOSE OF FINANCE (OWNER OCCUPATION)

Construction of dwellings

The number of finance commitments for the construction of dwellings for owner occupation (trend) fell 1.6% in March 2011 compared with February 2011, following a fall of 1.7% in February 2011. The seasonally adjusted series fell 1.1% in March 2011.

Purchase of new dwellings

The number of finance commitments for the purchase of new dwellings for owner occupation (trend) fell 5.6% in March 2011 compared with February 2011, following a fall of 5.4% in February 2011. The seasonally adjusted series rose 2.4% in March 2011, after falls of more than 8% in each of the three previous months.

Purchase of established dwellings (including refinancing across lending institutions)

The number of finance commitments for the purchase of established dwellings for owner occupation (trend) fell 1.9% in March 2011 compared with February 2011, following a fall of 1.8% in February 2011. The seasonally adjusted series fell 1.8% in March 2011.

Refinancing

The number of refinancing commitments for owner occupied housing (trend) fell 1.5% in March 2011 compared with February 2011, following a fall of 1.2% in February 2011. The seasonally adjusted series fell 3.0% in March 2011.

TYPE OF LENDER (OWNER OCCUPATION)

Banks

The number of commitments for owner occupied dwellings financed by banks (trend) fell 1.5% in March 2011 compared with February 2011, following a fall of 1.6% in February 2011. The seasonally adjusted series rose 0.1% in March 2011.

Non-banks

The number of commitments for owner occupied dwellings financed by non-banks (trend) fell 5.1% in March 2011, following a fall of 4.4% in February 2011. The seasonally adjusted series fell 12.3% in March 2011, following falls of more than 9% in each of the two previous months. The number of commitments for owner occupied dwellings financed by permanent building societies (trend) fell 4.0%. The seasonally adjusted series rose 0.5% in March 2011.

HOUSING LOAN OUTSTANDINGS

At the end of March 2011, the value of outstanding housing loans financed by authorised deposit-taking institutions (ADIs) was $1,074,328m, up $11,503m (1.1%) from the February 2011 closing balance. Owner occupied housing loan outstandings financed by ADIs rose $8,798m (1.2%) to $751,144m and investment housing loan outstandings financed by ADIs rose $2,705m (0.8%) to $323,184m.

Bank housing loan outstandings rose $8,890m (0.9%) during March 2011 to reach a closing balance of $1,018,866m. Owner occupied housing loan outstandings of banks rose $6,404m (0.9%) to $706,263m and investment housing loan outstandings of banks rose $2,486m (0.8%) to $312,603m.

Source: Aud Gov

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5 Major Currency Plunged Toward USD

8-13 may 2011, if we look at last week, some of 5 major currency showed bad result which means that almost all major currency declined gradually toward USD. Today, I try to make summarize by choosing what indicators which have a high impact along this week, the trader must analyze what had been happened along this week, and these both technical and fundamental factor will definitely influence currency mover in the coming week. It is good for trader to prepare what decision will be taken next week. I divided into two part analysis, for more further information please look at forexfactory. 

Technical

EUR/USD, French Industrial Production m/m dropped from 0,55 to -0,9%. Industrial Production m/m was bad result from 0,4% to -0,2%. French Prelim GDP q/q had raised from 0,6% to 1,0%. German Prelim GDP q/q was also going up 0,95 to 1,5%. French Prelim Non-Farm Payrolls q/q growth from 0,2% (previous) to 0,4% (actual). Flash GDP q/q was good from 0,6% to 0,8%

AUD/USD, ANZ Job Advertisements m/m declined from 1,3% (previous) to 1,0%. NAB Business Confidence was down slightly from 9 to 7. Trade Balance rose from 0,49B to 1,74B. Employment Change showed a bad from 17,6K to -22,1K

Unemployment Rate still remain unchanged about 4,9%

GBP/USD, Halifax HPI m/m dropped from 0,2% to -1,4%. BRC Retail Sales Monitor y/y was good result from -3,5% to 5,2%. RICS House Price Balance good increased slightly from -22% to -21%. Manufacturing Production m/m rose slightly from 0,3% to 0,2%

NIESR GDP Estimate was not a good sign from 0,5% to 0,3%

USD/CHF, SECO Consumer Climate plunged significantly from 10 to -1. CPI m/m also dropped from 0,5% to 0,1%. PPI m/m was not like expected which dropped from 0,4% to 0,3%

USD/JPY, for yen currency is no much indicator can be analyzed, the screenshoot of yen currency showed below 

Fundamental

We started from EUR currency, some reasons which give big influence because the rise of the euro had a role in weakening industrial output. The higher costs for importers overseas made European exports less attractive. It’s becoming hard for Germany to carry all the Euro-zone on its shoulders, and this is true for the debt crisis as well. Moreover, what outlook for German in 2011 can be read about German economy starting into 2011 with momentum. ECB said "We should assure a sustainable contribution to [economic] growth by the financial sector. Spain has taken measures of an historic dimension to accommodate demand for credit once it recovers, Ordonez said.

How about AUD currency, some reason are the federal government also announced plans to alleviate labour shortages that threaten to fuel inflation as Australia rides an historic Asia-led resources boom. But most of the measures have already been leaked and there was little left to surprise investors. Analysts say the budget has little bearing on their interest rate outlook Another is because steep decline in full-time jobs, prompting markets to slice a full cent off the Australian dollar as markets lowered the risk of a near-term interest rate hike. The job gains have been led by health, construction, education and professional sectors. Bumper returns on key exports such as iron ore and coal are giving miners massive amounts of cash to invest, employ and pay a lot more. At the same time, the windfall to national incomes is driving strong growth in household demand for services, from health to education.

GBP factors also affect currency mover like trying to assess the precise degree of pass-through is obviously difficult. Our best estimate is around three-quarters of the increase in VAT was passed through which is likely to add a little more than 1 percentage point to the inflation rate. Some analysts have said with the wedge so wide, a hike in Bank Rate may make little difference to commercial banks, as the wedge could narrow, but King appeared to take the opposite view. Weak confidence amongst households, partly due to uncertainty over the economic outlook, is constraining housing demand, as signs of a fading economic recovery and tighter lending conditions dented property demand. Manufacturing was one of the drivers of the British economy until a few months ago, but also this sector significantly slowed down, as seen in the last two purchasing managers’ indices. For Japan currency, financial institutions were restoring their closed branches while at the same time shifting their operations from closed branches to neighboring ones as part of their efforts to maintain business operations at the windows. There was growing demand in the disaster areas at this point for cash to purchase daily necessities, and to meet such demand each.

Last one about CHF currency, this decline is almost exclusively due to a more negative assessment of households on their saving possibilities. By contrast, assessment on job security improved markedly. Significant changes were registered during the survey for households' assessments on price development over the last twelve months instead of droping in commodity prices, took some of the hot air out of the Swissy. Switzerland’s economy is doing great, but the falling commodity prices and the European weakness might be marking a long awaited turnaround

In summary, 5 major currency were stilll not good condition for this week, almost all major currency dropped. You should carefully consider some indicator above because those result gave a high impact as well as fundamental factors. Broadly analyze will help trader to make a right decision.

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King Raises Inflation Forecast – Boosts the Pound

Mevyn King surprised and raised the long term inflation forecasts in the BOE Inflation Report. The report also states that GDP is better than reported. This boosts GBP/USD that broke above resistance. Update.
 

The governor of the BoE, Mervyn King, is usually pessimistic and his actions tend to weaken the British pound. This time is different. Contrary to the usual stance that inflation is fueled by fuel and food, and that it is temporary, the inflation report sees a long term rise in inflation. The two year horizon, long term no matter how you look at it, was raised to almost 2%.

This may sound low in the long term, but it’s significantly higher than the previous long term estimate of 1.6%. This change raises the chances of a rate hike sooner than later.

At the beginning of the week, there was talk that a downgrade of the growth forecasts would hurt the pound. The BOE indeed lowered the growth forecasts, but it wasn’t too bad. Growth is expected to be at around 3%, and there’s also a comment about official GDP figures being too low – this is very good for the pound.

It seems that the market focuses on inflation and improved chances of a rate hike in the near future. This goes hand in hand with the current optimism that replaced the gloomy mood at the end of the previous week and at the beginning of this one.

GBP/USD now trades just under 1.65, approaching the 1.6540 line. Levels above are 1.66 and 1.67. Below we find 1.6430 and 1.63.

Earlier today, the pound made significant gains on various factors. Greece is likely to receive another bailout package. While this may be a temporary solution, the markets like it, and it weakens the dollar across the board. In addition, there are talks that China might actually cut its interest rate, and this also triggers risk appetite, weakening the dollar. All this sent GBP/USD towards the 1.6430 resistance line.

Source: Forex Crunch

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Initial Jobless Claims in U.S. Fell 44,000 Last Week

The number of Americans filing first- time claims for unemployment insurance payments fell less than forecast last week, indicating recovery in the labor market is taking time to accelerate. 

Applications for jobless benefits decreased 44,000 in the week ended May 7 to 434,000, Labor Department figures showed today. Economists forecast 430,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls rose, while those getting extended payments decreased. 

A further decline in the number of firings accompanied by job gains elsewhere may shore up consumers’ confidence and boost average incomes, helping Americans overcome the strains of higher food and energy costs. U.S. payrolls have expanded for seven straight months, a sign the labor market is strengthening. 

“These numbers are consistent with the consumer continuing to spend and the recovery continuing to gain traction,” said Conrad DeQuadros, a senior economist at RDQ Economics LLC in New York. “The only problem is that we’re digging out of a very deep hole in employment, so the unemployment rate will probably remain elevated.” 

Other reports today showed retail sales rose in April, reflecting gains at service stations and grocery stores, and wholesale costs rose more than forecast.

Treasuries Fall

Stocks and Treasuries fell after the reports. The Standard & Poor’s 500 Index declined 0.3 percent to 1,337.95 at 9:31 a.m. in New York. The yield on the benchmark 10-year Treasury note rose to 3.19 percent from 3.16 percent late yesterday. 

Estimates for first-time claims ranged from 400,000 to 465,000 in the Bloomberg News survey of 44 economists. 

The Labor Department initially reported the prior week’s applications at 474,000, elevated by events that seasonal variations failed to take into account. A spring break holiday in New York, a new emergency benefits program in Oregon and auto shutdowns caused by the disaster in Japan were the main reasons for the surge, a Labor Department spokesman said last week. 

A Labor Department official said today there was a significant increase for initial jobless claims in Alabama related to damage from the tornadoes and storms. The official said that figure did not affect the national numbers. 

The four-week moving average, a less-volatile measure, increased to 436,750 from 432,250, the highest since November. 

The number of people continuing to collect jobless benefits rose by 5,000 in the week ended April 30 to 3.76 million. Economists forecast the number would fall to 3.7 million. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.

Emergency Payments

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 17,000 to 4.1 million in the week ended April 23. 

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3 percent in the week ended April 30, today’s report showed. Thirty-one states and territories reported an increase in claims, while 22 had a decrease. 

Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates. 

Federal Reserve Bank of New York President William C. Dudley said last week the recovery is falling short of the central bank’s goals even with job gains. 

“Economic conditions have improved in the past year,” Dudley said May 6. “Yet the recovery remains moderate and we still have a considerable way to go to meet the Fed’s dual mandate of full employment and price stability.” 

General Motors Co. (GM) said May 10 it will invest $2 billion in plants in eight U.S. states as it works to boost production and market share. About $1.8 billion of that investment would potentially create or save 4,000 jobs at 17 facilities, depending on completing local tax deals, the Detroit-based automaker said. 

Source: Bloomberg By Alex Kowalski and Timothy R. Homan 

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