Focus this week happened to be on what was occurring across the pond. Stateside data had limited direct influence on the big dollar, that was left up to the EU summit outcome. The Euro relief or short covering pain is beginning to find some hidden support that is expected to carry into next weeks holiday shortened trading week in the US. Do not be surprised to see Euro skepticism making a return soon. Analysts suggest that the EU may still not have achieved its TARP moment because of the â€œpersistent doubts about where the combined EFSF/ESM mega funds to backstop both banking and periphery bond markets are to come from.â€ Underlying sentiment remains vulnerable, evidenced by market reaction post the Fedâ€™s extension of Operation Twist. Uncertainty on Greece hasnâ€™t receded completely, despite the successful formation of a new government.
Below are some other highlights of the week:
- USD: US New Home Sales jumped last month (+369k) from Aprilâ€™s static print (+343k). Last month was the fastest pace of sales in two years. Back then, sales were supported by the homebuyer tax credit program. Analysts note that inventories seemed to have bottomed out, having set a string of new record lows. Monthâ€™s supply of homes has dropped from 5 to 4.7 (the lowest level in five years). Prices have also slipped with the average falling from +$283.9k to +$273.9k and the median edging down from +$236k to +$234.5k.
- USD: US consumer mood on the economy soured this month for the fourth consecutive time. The preliminary consumer confidence index slid to 62 from 64.4 last month. Digging deeper, the present situation index stood at 46.6, from 44.9 the prior month, while the expectation index slid to 72.3 vs. 77.3. If this continues, expect spending to be constrained in the short term.
- USD: Durable good orders (longer lasting items) posted its first gain in three-months (+1.1% seasonally adjusted to +$217.15b) in May this week. The gain was lead by stronger demand for machinery, defense equipment and cars. However, job creation in the sector has slowed along with the broader economy. Last months US payroll figure (+69k) was the weakest this year. Ex-transport, goods grew +0.4% while ex-defense, durables were +0.7% higher.
- USD: Data this week suggests that there is a sign of a bottom in US housing. Pending home sales jumped +5.9% in May. Note, the index measures contracts signed and not closed. This headline equals Marchâ€™s print, which happened to be the highest level in two-years.
- USD: The number of US workers filing initial applications for unemployment benefits fell last week (-6k to a seasonally adjusted +386k), but remained high, again signaling muted job growth. The number of workers requesting UI was equivalent to +2.6% of employed workers paying into the system.
- CAD: The Canadian economy kicked off Q2 with the largest monthly output gain in six months (+0.3%), as activity in the mining and oil and gas sector bounced back and wholesale trade grew.
- FED: St. Louis President, Bullard believes that the Fed policy is well adjusted to deal with current economic troubles. However, we must be cautious not to let the 1970s inflation genie out of the bottle.
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