Weak Rebound in Pending Home Sales, All Eyes on Testimonies in Washington
By Kathy Lien | February 02, 2010 | 12:05 PM | 0 Comments
Consider today's price action in the currency market to be the calm before the storm. This morning, the U.S. dollar is virtually unchanged against most of the major currencies but with 2 more interest rate decisions this week and non-farm payrolls on Friday, this consolidative price action is not going to last. The lack of market moving data today explains the mixed performance of the U.S. dollar. Pending home sales was the only number released this morning and it came out right in line with expectations.
The number of contracts to buy previously owned homes rose 1.0 percent after plunging 16.4 percent the prior month. This lackluster rebound following a record decline suggests that housing demand may be fading. Like new and existing homes sales, pending transactions were affected by buyers rushing to take advantage of the $8,000 tax credit which was originally set to expire on November 30th. With pending home sales behind us, traders will now be focusing on Geithner's Testimony to the Senate Finance Committee (10am EST or 1500 GMT) and Volcker's testimony before the Senate Banking Committee (2:30pm ET or 1930 GMT). Volcker's support more regulation for the financial industry could lead to mild risk aversion.
What Australia's Rate Decision Means for Europe
All of the action today is concentrated in the Australian dollar, which fell more than 1 percent after the Reserve Bank surprised the markets by keeping interest rates unchanged. What is important about the Australian rate decision is what it could mean for the upcoming European rate decisions. The RBA is slowing down because business credit has continued to fall, companies are continuing to reduce leverage and lenders have imposed tighter lending standards. If this is happening in Australia, a country that been outperforming others, there is a good chance that these same problems could be plaguing weaker nations as well, prompting them to could err on the side of caution. The Australians were also worried about China's efforts to reduce stimulus to their economy which will be something that is also on the minds of European policy makers.
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