The Euro was able to soar to breach the $1.50 psychological level and the Cable was near the $2.00 level once again. The opportunity for majors to climb their way up the ladder as some reach previous levels and others break all time highs is back in the market. Investor sentiment is really bad as the world's largest economy is about to hit a state of stagflation.
Primary commodities were also on the rise as crude passed the three digit barrier and reached the $102.00 per barrel level while the precious metal kept setting new records as it hit $964.00 per ounce. Another confirmation for high inflation alongside the PPI readings was not neededÃ¢â‚¬Â¦but destiny brings all of them together once again to scare the hearts of investors.
The US Durable Goods for the month of January came in at a fall of 5.3% worse than the expected and previous readings of -4.0% and 5.2% respectively. The December reading was revised down further to 4%. As for the Durables EX Transportation for the month January, data came in at -1.6% worse than the expected and previous readings of -1.3% and 2.6% respectively.
Despite the reports of higher exports, almost every industry declined in January after the flood of aircraft orders in December. The economy is assured now that it will witness a slowdown and therefore companies had to reduce their spending.
The only two industries who gained the past month were the unfilled orders showing an incline of 0.6% and durable goods shipped with a 1.8% gain. On the other end, huge losses were seen in the defense capital goods after it plunged 19.9%, transport equipment as it fell 13.4% and non-defense capital goods showing a loss of 8.1%.
The durable goods affect in the market was pretty much locked from before since all expected a fall in the reading and therefore not many movements were witnessed. After the sharp downturn the dollar saw yesterday due to Mr. Kohn's statements, market players were waiting for Mr. Bernanke's testimony for a slight hope to reverse the losses.
In a different report, the Commerce Department released its new home sales annual reading for the month of January coming in at 588K opposing expectations of 600,000 and the previous revised reading to the upside to 605,000 from 604,000.
U.S. homes fell by 2.8% as the Northeastern region took the lead showing a drop of more than 10%. January's sales were down 33.9% compared to January 2007. Sales in all regions crumbled with the exception of the West were sales inclined to 142K from 139K. The median price of a new home decreased by 15.1% to $216,000 in January from $254,400 in January 2007. The average price decreased by 12.1% to $276,600 from $314,600 a year earlier. In December last year, the median price was $225,600 and the average was $274,700.
At the same time, Fed Chairman Mr. Ben Bernanke was testifying before the house Panel; he seems dovish as expectations recognizing the down side risks to growth, with out specifying the extent of easing to be seen, though he's pointing out to some improvement in the economic picture as seen by FOMC participants; as they will stay vigilant on the growth prospects in evaluating inputs and will act in a timely manner as needed to support growth and provide adequate insurance against downside risks. So inflation concerns are not on their agenda at the mean time, as they believe moderation in growth would eventually restrain inflationary pressures nevertheless they did not discard the issue entirely noting the surge in commodities in the recent weeks pause great upside risk to prices stability.
This wasn't enough to save the greenback from further falling as the Euro gained momentum to record an all time high at 1.5102 before easing back. It looks like further cuts are still on the way unless the housing slump reaches rock bottom. The end is still far for majors. Higher levels will be achieved if a miracle fails to lift the U.S. economy from losing further groundsÃ¢â‚¬Â¦