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  • FOMC Statement Text Most Likely To Change; Risks Are Dovish 0 comments
    Oct 30, 2013 12:13 PM

    Risks to FOMC statement include those regarding overall expansion of activity, labor and housing, assessment of each may be more dovish.

    • "Economic activity has been expanding at a moderate pace"

    • While growth does continue at moderate pace, data disappointing economists' expectations; Bloomberg economic surprise index -0.097, nearing low since June

    • Most data still for Sept., before govt shutdown

    • "Some indicators of labor market conditions have shown further improvement in recent months"

    • While "some indicators" show improvement, ADP and non-farm payrolls have disappointed

    • ADP employment below expectations four consecutive months, pressing down toward low since 2012

    • Private non-farm payrolls for Sept. 126k vs est. 180k

    • "Housing sector has been strengthening"

    • Housing/real estate market data providing main drag on Bloomberg U.S. economic surprise index

    • Key downside surprises to

    • Pending home sales, Sept., -5.6% M/m vs est. 0.0%, worst decline since 2010, 11th worst decline since 2000

    • NAHB hsg. mkt. index, Aug., 55 vs est. 57, prior revised to 57 from 58; 2nd consecutive decline

    • House price index, Aug., 0.3% M/m vs est. 0.8%, prior revised to 0.8% from 1.0%, slowest pace since Sept. 2012

    • "Mortgage rates have risen further"

    • The one potential positive change to language, as avg. 30-yr. mortgage rate 4.15%, down from 4.67% Sept. 5, still up from 3.40% May 1

    • FOMC may make few if any changes due to volatility induced by govt shutdown, lack of formal economic projection releases, nearness of change in Fed chairman

    • NOTE: TJ Marta is an FX strategist who writes for First Word. The observations he makes are his own.

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