Kay Van-Petersen
Saxo's global macro strategist Kay Van-Petersen examines the big issues for the markets including AUDUSD, potential US-China trade war and interest rates.
Article / 17 January 2014 at 5:54 GMT

3 Numbers to Watch: US housing, output & consumer sentiment

Blogger / MoreLiver's Daily

• One million is the new normal for US housing permits
• Modest gain in store for US industrial production
• Slight consumer sentiment uptick in the cards

Today’s scheduled possible Eurozone credit rating changes are Ireland (Moody’s), Netherlands (Fitch) and Portugal (S&P). The Federal Reserve’s Jeffrey Lacker will be speaking at 17:30 GMT. During the European session the UK retail sales for the all-important month of December are out at 09:30 GMT, so GBP could be moving today.

Note that the AUDUSD has broken through the 2013 August and December lows of 0.8818—0.8845, but has not managed to finish with a daily close below those levels. The bad unemployment numbers pushed expectations toward a rate cut when the Reserve Bank of Australia convenes on February 4, (see Ken Veksler for more). Further AUD weakness could cause widespread weakness in other commodity- (CAD) and emerging currencies (especially in Asia), and perhaps thus lead to safe-haven flows to USD.

AUD weakness may trigger a bout of Asian contagion. Photo: Shutterstock

US December Housing Starts & Building Permits (13:15 GMT): The consensus expects housing starts to increase by 975,000, less than November’s surprisingly high 1,091,000, but more than October’s 889,000. The uptrend remains well-behaved, and after bottoming-out in 2009-2011, it looks like the one million is now the new normal. The long-term average is around 1,500,000 units, and the bubble highs were around 2,200,000. so there is still plenty of upside left for the market.

Housing inventories have been increasing somewhat, which should limit the price rises and thus housing starts in the coming months, but after a strong performance in 2013, a more mediocre year should be more than welcome, as many have been scared of another bubble being formed. A lot rests on how the mortgage rates develop, and thus the level of the US Treasury bonds' yields.

us housing

US December Industrial Production & Capacity Utilisation (14:15 GMT). Industrial production is expected to have increased by 0.3 percent in December, a modest gain after November’s surprisingly large increase of 1.1 percent. That would still be enough to push the year-to-year change up to 3.5 percent. The steady rise has led to higher capacity utilisation (CU) as well. The consensus forecast sees the CU coming in at 79.1, a level not seen since 2008. Back in February 2013 I mentioned that around 80-level the CU could become an issue to the markets. Luckily, there is still plenty of slack in the labour markets, so higher CU should not be immediately inflationary. However, companies might be forced to increase investments, either domestically or overseas. That choice and globalisation make the connection between inflation and growth more complex than in the past.

us industrial production

US January Flash US Thomson Reuters/University of Michigan Survey of Consumers (14:55 GMT). The sentiment index is expected to post a small increase to 83.5, up from 82.5 in December. While consumer confidence is an important measure, most of its informational value can be derived from labour markets, mean reversion and stock prices. Additionally, the U.Michigan index is closely correlated with other higher-frequency sentiment indicators like Bloomberg’s or Gallup’s weekly indices. Gallup’s index has remained at the highs posted right before Christmas, while Bloomberg’s index fallen after the corresponding high and is currently back to levels last seen in the beginning of December.

Thus, a chance for a negative surprise exists — even a small decrease of the index cannot be ruled out. As next week’s data calendar looks relatively light and the weak December employment report is still haunting investors ahead of the Federal Reserve’s coming tapering at its January 28-29 meeting, a negative surprise could increase expectations that the Fed would not front-load the taper to the early part of the year.

That is the conventional wisdom. In my opinion, questions of when, and by how much the Fed will taper, are meaningless. The Fed has clearly indicated that barring a pure catastrophe, the tapering will continue at a steady pace. Thus, the markets are now moving ‘back to fundamentals’: happy consumers mean more purchases of houses and consumer goods, and the whole economy benefits from that. This tug-of-war between the previous ‘bad news is good for markets’ because of the money printing and the coming ‘good news is good for markets’ is still ongoing, but the latter party is slowly beginning to win.

 US UMichSentiment

3 Numbers to Watch is published Monday-Friday on  You can choose to be notified whenever a new piece is ready if you become a TradingFloor member - it's free, and you can sign in with Twitter, Facebook, Google or LinkedIn.  You can also follow all the news from our macro team on our Macro Page.





The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail