Morning Commentary: New Month – Upbeat and Positive

Foreign Exchange - Morning Commentary
New Month – Upbeat and Positive
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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
Today is March 1 and the markets are on a “risk on” mode with global equities and interest rates moving in lockstep once again with commodity currencies outperforming. The U.S. and global economy seems to be putting the dismal Q4 reaction in economic performance and the equity collapse in the rearview mirror for now and sees brighter days ahead. A dovish pivot by the Fed and more upbeat and positive news regarding Brexit and the U.S.-China trade talks have allayed fears for now of a global economic slowdown.
Our colleague, Paul Single, at City National Rochdale has sent us an article that adds to the positive and upbeat nature of the past few weeks and months. Home ownership in the U.S. has hit its highest level in Q4 2018 (64.8%) since 2014 and strongly suggests a shift from renting to owning especially among those 35 to 44-years old. This is a very positive trend as it suggests that despite scant inventories and low affordability, buyers are expressing their desire for the American dream. It also provides an additional boost to the economy in the form of new construction, renovations, furniture, maintenance services and real-estate services etc.
It is important to keep this number in a broader historical perspective.  The peak for U.S. home ownership since the 1960s occurred just prior to the dot-com bubble near 2002 when home ownership reached 69.2%. After the Great Recession, home ownership collapsed to 63.0% and has been slowly clawing its way to higher levels. To also keep things in perspective, the median price of a home in the U.S. is $225,300 (Zillow) today; the median price of a home in Los Angeles County is $615,000 which is up 8% from one year ago and partly explains why there has been an outmigration from California to neighboring states that have cheaper housing.
  • I am afraid not all the news is positive and upbeat today. U.S. Personal Income for January came in slightly better than expectations at -0.1%, but Personal Spending for December was much weaker than consensus at -0.5%. Markets have largely ignored the data as U.S. interest rates and equities are all in positive territory.
  • Canada reported GDP for December and it was weaker than forecast at -0.1%. GDP YoY has now fallen from 1.7% to 1.1%. This is the slowest pace of growth since Q2 2016. Canadian interest rates are flat on the session and the Canadian dollar is weaker.
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