Tainted Alpha

Housing starts rose 0.5% in September to 590k units vs. 615k consensus representing 2.8% growth. August data was revised down from 598k units reported last month to 587k units. If we take this into account the consensus was projecting 4.7 increase; and the reported figure was 0.5%. Bloomberg link: Housing Starts in U.S. Increased Less Than Forecast.

Building permits also fell 1.2%  to a 573k annual rate last month. They were forecast to climb to a 595k pace from 579,000 in August. The sluggish housing data continues.

Producer price indexes showed once more that the inflation is out of the picture now and for some time to come. PPI m-o-m -0.6% vs. -0.3% consensus. PPI less food & energy m-o-m -0.1% vs 0.1% consensus.  Bloomberg story: Producer Prices in U.S. Declined 0.6% in September.

U.S. dollar hit the new low. A lot of disgruntled nations and central bankers on the falling dollar. Exporters especially hit. Bloomberg links: Won Crushes Yen as Dollar Substitute in Asian Rally; Canada Keeps Key Rate 0.25%, Says Dollar to Offset Growth Signs; Europe Officials Concerned on Dollar, Call Euro Gain ‘Disaster’. Maybe a strong enough critical mass to suppress further dollar slide.

Chart 1. U.S. Dollar Index

Canadian dollar fell today on Canadian central bank keeping key rate at record low of 0.25%. The warning on Canadian dollar strength offsetting recovery signs weighted on the markets. Bloomberg link: Canada Keeps Key Rate 0.25%, Says Dollar to Offset Growth Signs.

On the other side of the globe Reserve Bank of Australia employing opposite rhetoric to all central banks mentioned above. Bloomberg link: RBA Signals Further Rate Increases, Tolerance of Currency Gains . They feel confident that the Australian economy is out of the woods, I tend to agree. Australian economic policy looks sound.

Chart 2. Crude Oil Futures

My short crude oil trade performed miserably; have closed the position yesterday at substantial loss; have underestimated the power of falling dollar.  My view is still that the crude oil price and fundamentals are disconnected. I will look to re initiate the trade.

Bank of Canada, Crude Oil, Euro, Japanese Yen, PPI, Reserve Bank of Australia, U.S. Dollar, U.S. Housing, U.S. Housing Starts

This entry was posted on Tuesday, October 20th, 2009 at 9:36 am and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.