USD/CHF: US Housing Market Becomes Key to Greenback Rise

Even as the US Flash Manufacturing Purchasing Managers’ Index dropped more than expected to 51.8 points in July from the 52.1 points forecast, the American currency managed to win by 44 pips opposing the Swiss franc.

The July Markit Flash US Manufacturing Purchasing Managers’ Index indicated the weakest improvement in US manufacturing sector business conditions in 19 months. The US manufacturing sector is clearly struggling under the pressure from falling exports, which showed the first back-to-back monthly decline for almost three years in July. Growth of production is slowing closer to stagnation as a result, and rising levels of unsold stock may mean companies seek to scale back production in coming months unless demand picks up again.

However, the American dollar is likely to persist to immense versus the Swissie as New Home Sales in the US are anticipated to increase to an annualized rate of 372,000 homes sold in June from 369,000 in the month before. Even though domestic demand appears to be showing ongoing signs of resilience, which encourages firms to take on more staff, economists project demand for new US homes to probably climb in June to the highest level in two years. Hence, another sign the housing market is finally recovering.

Purchases increased to a 371,000 annual rate, which is the most since April 2010 and up 0.4 percent from the prior month. Record-low mortgage rates and stabilizing home prices have spurred buyer traffic, even as unemployment and strict lending standards remain obstacles. Federal Reserve Chairman Ben S. Bernanke is among those who say the housing market is one part of the economy that is improving as other areas cool.

Some positive developments have unfolded in recent months, but nevertheless, the sector is merely inching ahead rather than surging. On the positive side, the buying environment has improved considerably. Builders also broke ground on an annual pace of 760,000 homes last month, which is up by 6.9 percent from May and the fastest rate in almost four years.

Growth in construction and the historically low mortgage rates are among modest signs of a housing recovery, even as some buyers show concern about personal finances and the broader economy and have difficulty meeting lending standards. Thus, the different improvements in different parts of the country, which is key to the recoil of the US economy sees the climb of the American dollar. Hence, a long position is perceived for the USD/CHF pair.


Article by AlgosysFx Forex Trading Solutions