The US dollar continued to weaken after news that the help wanted index dropped from 22 to 21 in the month of November and new homes sales fell to 12 year lows. Any hope for a housing market recovery has been eradicated by today’s release as the steep decline points to the lack of buyers. Prospective homeowners are holding out until they see a bottom which is certainly not healthy for a market that desperately needs buyers. Interestingly enough, the median price of a new home actually rose $10,000 while inventories dropped. Still, the data suggests that the housing downturn is not over. On Monday, we are expecting existing home sales which should reconfirm the overall vulnerability of that sector. Chicago PMI was also released today and even though the index bucked the trend of other manufacturing reports by jumping from 52.9 to 56.6, the dollar failed to budge in the minutes following the release as traders held off for the new home sales report. In the week ahead, bond markets have an early close on Monday and all financial markets are closed on Tuesday. However this does not mean that it will be a week without volatility. It would actually be very surprising if that became the case because we have a lot of important US data due for release including existing home sales, manufacturing and service sector ISM and non-farm payrolls. Conditions in the labor market are expected to deteriorate because of a rise in jobless claims and a drop in the employment component of the Chicago PMI and Philly Fed indexes.
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