US Data Shows Improvement in Labor Market and Housing, and Tame Producer Prices
Jobless claims continued to ease as the headline print at 348K, posted its lowest reading since March 2008. That continues the downward trend in jobs firings seen over the past 5 months.
At the same time, housing starts continued to provide support as well, posting a better than expected result, rebounding by 1.5% to an annualized rate of 0.699 million in January.
Looking at the trend here, it shows that construction may help add to GDP growth in the later parts of the 4Q 2011 and early part of the 1Q 2012. The rebound was led by multi-family components.
At the same time, not much in the way of pressure from inflation, with producer prices up just 0.1% on the month in January, though the core rate rose 0.4%, more than expected.
In annual terms we continue to see the trend form the past few months continuing as well, with the headline rate continuing to decline (4.1% vs 4.8% in Dec), while the core rate held steady at 3%.
S&P Pares Some Losses, But Still Pressured
A labor market that on the face of it seems to be healing, improvement in construction, and tame inflation point to continued momentum in the US economy and may lessen the chance of more QE from the FOMC.
While better growth would be a positive for US equities and risk sentiment, the lower chance of QE may weaken sentiment from those that had priced in more stimulus.
In the short therm the better data helped the S&p500 index to pare some of its losses from yesterday’s session, after the index had found support near 1334.25 overnight. The retracement so far is still a shallow one considering the uncertainty around Europe which is pressuring risk assets.
In the more longer term picture, we see that the S&P500 index, after hitting a 7-month high above 1354.25 in yesterday’s session has retreated, and now tests an important support trendline drawn from connecting the lows in late November with the lows from mid-December. With the RSI index showing some topping off after moving above the 70 level, the prosepct for a further retracemetn is there.
The battleground for sentiment then is what happens next with Greece as a messy default there would have risk-averse implications, while in the US the string of better labor, housing, and manufacturing reports help to support risk appetite.
USD/JPY Extends Gains Post US Data
In the currency markets, today’s positive jobs data helps add to the theme of USD strength against the JPY. Since Monday’s announcement by the BOJ of more quantitative easing, the Yen has come under pressure vs the dollar, and today’s data along with an ambiguous take on whether the Fed will go through with more easing of its own because of the recent better data has helped to push the USD/JPY to new highs.
The pair has held its move above 78.30, and has pushed above the 200-daily ema. The next key level will be the October highs near 79.50, where Japanese exporters may come in to covert their foreign profits that are in USD to Japanese Yen, which would mean supply of dollars around that level.
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Nick Nasad is an analyst, educator, and trader; and one of the main contributors to FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.
