With economic reports from the US expected to provide rather positive results and with investors continuing to weigh the possibility of further action from the Federal Reserve, the US dollar is presumed to weaken alongside the Canadian dollar today. A raft of encouraging housing, manufacturing and consumer reports are in store today while the markets speculate on the future actions of the Fed ahead of Ben Bernanke’s Jackson Hole speech on Friday.
In a further sign that the US housing market is stabilizing, the S&P/Case-Shiller Composite-20 House Price Index is expected to report that year-on-year house prices declined at its slowest pace since September 2010 in June. The selling price of single-family new homes is estimated to have dipped by 0.3 percent in June, improving from the 0.7 percent decline seen in May. Increased sales activity due to lower interest rates and increased hiring likely helped support the ongoing housing recovery. Meanwhile, confidence among American consumers is seemingly holding up to a three-month high in August. The Conference Board Consumer Confidence index is projected to come in at 65.8 points this month, very close to the 65.9-grade registered in July. The strong job gains seen in July likely helped shore up sentiment, suggesting that the rebound in consumer spending seen during the month is apt to continue in August. The US manufacturing sector also seems to be on the mend as the Federal Reserve Bank of Richmond is foreseen to reveal that the contraction in manufacturing conditions in the area slowed in August. The Richmond Manufacturing Index is believed to rise from -17 points to -11 points this month. Although it still represents a slowdown, the figure suggests that factory conditions are starting to bounce back.
Meanwhile, with the Jackson Hole Symposium coming up later this week, the markets continue to speculate whether Fed Chairman Bernanke is likely to signal new measures in the form of quantitative easing to boost the economy in his speech. The bulls have reason to hope after the minutes of the Fed’s latest meeting disclosed that policymakers in the central bank are prepared to provide new stimulus “fairly soon” unless signs of a healthy rebound emerge. Likewise, Bernanke himself alluded to more action, saying that he sees scope for further action in an August 22 letter to Californian Republican Darrell Issa. Yesterday, Federal Reserve Bank of Cleveland President Sandra Pianalto, a voting member of the FOMC, expressed that the recovery remains “frustratingly slow,” and that additional bond purchases could provide a boost to economic growth if the risks are managed. Hence, with Pianalto continuing to open the door for more action from the Fed, risk-on trades are deemed to prevail today. As such, a short position favoring the Loonie is advised today.
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