Housing starts in the U.S. is expected to slip to an annualized rate of 540K in March as credit conditions remain far from normal however, as policymakers take unprecedented steps to lower mortgage rates and stem the rise in foreclosed homes, falling borrowing costs paired with low-priced property values could lure potential home buyers as the market nears a bottom.
Trading the News: U.S. Housing Start
What’s Expected
Time of release: 04/16/2009 12:30 GMT, 08:30 EST
Primary Pair Impact : EURUSD
Expected: 540K
Previous: 583K
Impact the U.S. Housing Start report had over EURUSD for the past 2 months
February 2009 U.S. Housing Start
| U.S housing starts unexpectedly increased 22.2% in February to 583K, while building permits rose to 547K from a revised reading of 531K in January. The breakdown of the report showed that construction of multi-family homes surged 82.3% during the month, while work done on single-family homes increased 1.1%, and the data suggests that the housing market could be nearing a bottom as policymakers take unprecedented steps to shore up the economy. As bank remain reluctant to lend, the Federal Reserve is expected to step up its effort to lower borrowing costs further, and may take extraordinary steps to pump up the money supply as the outlook for growth and inflation falter. Meanwhile, the Obama administration pledged to spend another $275B in an effort to stem the rise in foreclosures, and the efforts should help to make homes more affordable as households face a weakening labor market. | |
January 2009 U.S. Housing Start
| Housing starts in the U.S. plunged 16.8% to 466K in January, which is the lowest level since records began in 1959, while building permits dropped 4.8% to 521K. A deeper look at the report showed that construction of single-family homes fell 12.2% during the month, while work done on multi-family homes plunged 29.7%, and the data continues to reinforce a weakening outlook for the housing market as property values slide while foreclosures continue to swell. As a result, President Obama announced that the administration will commit $75B in an effort to lower mortgage rates and to stem the rise in foreclosed homes however, demands for home purchases are likely to remain subdued throughout the first half of the year as credit conditions remain far from normal. Moreover, as the labor market deteriorates at a record pace, households are likely to face a difficult time in keeping up with mortgage payments, and stockpiles of unsold homes may continue to push higher as banks remain reluctant to lend. | |
What To Look For Before The Release
Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement:
| Bullish Scenario:
If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on EURUSD ahead of the data release. | Bearish Scenario: |
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