USD/CHF: Consumer Spending and Housing Stats Improve Sentiment

The US dollar is presumed to gain opposite the Swiss franc today on increasing signs that the US economy is gaining steam to conclude the year. Yesterday, the Commerce Department reported that consumer spending is apt to boost growth in the third and fourth quarters. Although the US stock markets remain closed as Superstorm Sandy bears on the East Coast, a gauge of housing prices on deck for release is believed to underscore the ameliorating state of the real estate sector.

US household purchases inclined by 0.8 percent in September, its fastest pace since February, after increasing by 0.5 percent in the previous month. Larger income gains, improved job prospects, and an improving housing market are seen to have bolstered consumer spending, which has shown encouraging rises in the past three months. When adjusted for inflation, spending increased 0.4 percent after edging up 0.1 percent in the prior month. Analysts say that the acceleration in spending will likely help the world’s largest economy overcome a slowdown in exports and business investment as global growth softens and concerns escalate over the fiscal cliff. Such trends corroborate last Friday’s third-quarter Gross Domestic Product report, which revealed that spending rose at an annual pace of 2 percent. That helped lift economic growth to 2.0 percent in the September quarter, better than the 1.3 percent pace in Q2. The spurt in purchases as the quarter ended, which was concentrated in long-lasting goods such as automobiles and the iPhone 5, signifies that some of the momentum could carry through the remainder of the year.

Meanwhile, in a sign that increased demand is boosting the US housing market, the S&P/CS Composite-20 House Price Index is estimated to post its largest increase in August since July 2010. The selling price of single-family homes in 20 metropolitan areas is foreseen to have mounted by 1.9 percent in August, larger than the 1.2 percent rise in the previous month. This potentially marks the third consecutive increase in housing prices as ultra low mortgage rates helped boost home refinancing and purchasing. Meanwhile, the Federal Reserve’s new bond purchase plan is believed to continue supporting the housing sector by bringing down mortgage rates further. On positive signs that the world’s largest economy is gaining steam in the final quarter of the year, the Greenback is seen to outclass its Swiss counterpart. Hence, a long position is recommended today.

Aviv N. Shapiro is a Senior Research Analyst and Business Development Officer for AlgosysFx.