US Road to Recovery: will Thursday's data mark the way to recovery?
Has the US entered a sustainable recovery path? The picture is blurry. Recent economic data gave mixed signals about the US economy and investors appear skeptical about their next move. Focus now turns to Thursday's data so as to get a clearer picture about the state of unemployment, the housing market, as well as, the economic activity in the US. Jobless Claims, Durable Goods Orders and New Home Sales are released on Thursday February 24.
One of the issues troubling the Fed is the country's stubbornly high unemployment. As the US economy signals recovery, job creation has remained surprisingly stagnant. Investors are closely focusing on the upcoming Jobless Claims report this Thursday looking for clues to gauge future employment growth. Nevertheless, recent data showed that Initial Jobless Claims data improving indicating job creation and a positive Non Farm Payrolls report for February. Will Thursday's report add strength to the view that the US economy is recovering? Or will it surprise the markets by showing a worse than expected result? Investors expect that jobless claims will drop to 405K compared to the previous figure of 410K.
Why do investors focus on New Home Sales? It is an important indicator for traders as it reveals the trend of the housing market and the economy's momentum. When new home sales increase it shows that people are confident about the future and their financial situation. Also, when new home sales increase then a chain of revenues for other people is generated including builders, realtors and home suppliers. December's new home sales report showed that 329,000 new homes have been sold; this was the highest level in eight months whilst the market was expecting an increase of 299,000. Is January going to prove that the housing market is gaining momentum? Investors expect this Thursday's January's New Home Sales to show a 330,000 figure.
Durable Goods Orders is also a significant indicator that is expected to move the markets. Durable goods are defined as hard products having a life expectancy of more than 3 years, such as automobiles, computers, appliances and airplanes. It is an indication of future economic activity in terms of industrial production and capital expenditure. When data reveals high figures it means that confidence is improving and predicts future growth. The market awaits Thursday's data so as to get a clearer insight about US' fragile economic recovery. Speculators argue for a 2.9% gain when there was a 2.5% decline in the month before.
If New Home Sales and Durable Goods Orders beat expectations then the dollar may strengthen as investors become more confident that the world's largest economy is growing. If data fails to meet expectations then the dollar may fall weighed by fears that the US economy is losing momentum. Whatever the outcome, it will certainly be an interesting day to trade!!!
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