The United States (U.S.) Commerce Department reported durable goods sales orders increased by 3.0% to $214.5 billion...
The United States (U.S.) Commerce Department reported durable goods sales orders increased by 3.0% to $214.5 billion. The figure, greater than the 2% analysts had projected, exhibited increasing strength in the manufacturing sector. Purchases were headed by transportation equipment that increased 5.5%. Business purchases that included non-defense capital goods moved up 2.9% eliminating previous months’ reductions. Companies purchased more primary metals, machinery and communications equipment countering depreciations in fabricated metals and electrical equipment orders. Despite the increase, manufacturing only accounts for ten percent of the economy and additional improvements must occur in ailing service’s sector to significantly impact country employment numbers.
Furthermore, the U.S. Labor Department reported jobless claims rose 21,000 to 377,000 for the week ending January 21st. The four week average moved down 2,500 to 377,500 from 380,000 showing a slight improvement. Numbers have remained below 400,000 for seven of the last eight weeks. This level is viewed by some economists as a mark that the economy has been increasing job numbers. Yet, unemployment numbers have a long way to go before they reduce to the historical norms. Additionally, unemployment numbers in January are typically expected to result higher as positions created for seasonal positions dissipate. The monthly average has altered little although recent calculations may suggest unemployment decreases on a larger scale. The current hiring pace, at 150,000 jobs per month, is barely keeping up with natural increases in the labor force. In addition to this, the Federal Reserve expects unemployment to reduce within 8.2%-8.5% at the end of 2012 and degrade further between 6.7%-7.6% by 2014.
With the Fed leaving the door open for further quantitative easing, we expect the U.S. Dollar to get weaker. We have already seen the EURUSD rally lose momentum as the pair failed to break above resistance at 1.3160. If the pair falls below support at 1.3000, the next level of support is seen at 1.2900.
Eugene Ross, Analyst
Admiral Markets
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