US Housing Market Could Improve Later This Year

US pending home sales in February fell 1.9% to 84.6 from January, according to the National Association of Realtors. This is worse than the drop of 1.1% expected, and a decline from January’s revised 0.3% increase. Although negativity can be seen in the numbers, NAR’s chief economist Lawrence Yun said existing home sales could start to show a sustained increase within a few months. “We’re looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets,” Yun said. “The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.” Opinions are swirling around that the overall market sentiment is likely to improve later this year and early 2009; even Bernanke and Greenspan are thinking the same way, or hoping that at least. If they are correct, that means the US economy will go through the slump throughout this year.

What Others Are Saying

Former Fed Chairman Alan Greenspan said Tuesday the drop in US home prices will probably end “well before” early next year as the number of houses on the market diminishes, thus helping the US economy to recover. Addressing a conference in Tokyo via satellite from Washington, Greenspan, said, “Once the markets start to stabilize, especially if the real economies don’t go into a severe recession, we can expect a recovery to begin to take place. It will be slow, it will be hesitant.” He also said “the current credit crisis is the most wrenching in the last half century and possibly more.” Ironically, he was possibly the one who caused the whole property and asset bubble while he was Fed chairman. In 2003, he cut the main rate to 1%, a 45-year low.

The International Monetary Fund said today financial losses stemming from the mortgage crisis may near $1 trillion, citing a “collective failure” to predict the breadth of the crisis.

Forex Trading

EUR/USD rose to expected resistance around 1.5800, and then bounced more than 100 pips from there to around 1.5670 before going above 1.5700 again. USD/CHF traded sideways, and its high is around 1.0150. Bullish force would only be unleashed if it breaks above 1.0250, possibly targeting 1.0350. The British pound is the biggest mover of the day, dropping more than 270 pips against the US dollar to below 1.9700 as traders short the pound on speculation of a BOE rate cut this Thursday.

Wednesday:

UK industrial production 0830 GMT

Eurozone GDP 0900 GMT

US MBA mortgage applications 1100 GMT

Fed’s Bernanke speaks 1330 GMT

Fed’s Fisher speaks on US economy 1730 GMT

UK NIESR GDP estimate 2301 GMT

Japan trade balance 2350 GMT

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