The decline in the US stock market shows how big the investors' concerns are about the spread of the coronavirus. Commodities, especially oil, can't find the bottom for the entire week as well. All these confirms the fact that many traders and investors are committed to reduce the economic growth rate of the United States in the 11th quarter of this year. Global economic growth is expected to slow down as well, but so far, there has been no reaction from the Fed to the current situation. Nevertheless, there are talks about needing a precautionary lowering of interest rates in the market. The Fed may do so to protect the economy in the future, as yesterday's data was not very positive.
The report yesterday about the growth rate of the US economy in the 4th quarter of last year did not make significant changes to the market. It kept the pressure on the US dollar, which lost more than 1% against the euro. The decline in companies' capital investments, as well as the change in the index in a more negative direction may negatively affect investors' mood after the US Department of Commerce releases data. The report indicates that according to the second preliminary estimate, gross domestic product grew to 2.1% in the fourth quarter of 2019, remaining unchanged compared to the first assessment. It completely coincided with the forecasts of economists. A similar increase was observed in the third quarter.
There is an update on companies' capital investments. Initially, it was expected to decrease by 1.5%, but companies' expenses fell by 2.3% in the 4th quarter. Nevertheless, this situation should change for the better in the 1st quarter of this year, as trade tensions between US and China have decreased slightly. However, it is worth remembering that the coronavirus has struck again, and it can become another reason for reducing investments against the backdrop of slowing global economic growth.
The demand for long-life products in the United States has also declined, which is a bad sign for the economy. The drop is directly related to production problems that persisted at the beginning of this year. According to the data, orders for durable goods in January 2020 decreased by 0.2% compared to the previous month, while economists expected them to fall by 1.5% immediately. Moreover, orders for transport equipment fell by 2.2%, while orders for civilian aircraft rose.
Meanwhile, the report on the US labor market was ignored, as the weekly data did not differ much from the forecasts of economists. According to the US Department of Labor, the number of initial applications for unemployment benefits for the week of February 16 to 22 increased by 8,000 and amounted to 219,000, while economists had expected it to be 214,000. Meanwhile, the number of secondary applications for the week of February 9 to 15 decreased by 9,000 and amounted to 1.724 million.
The residential real estate market in the United States continues to demonstrate stability. According to the National Association of Realtors, compared to December, the index of signed contracts for housing sales in January 2020 increased by 5.2%, while economists expected it to grow by 2%. Comparing it to the same period of the previous year, the index in January increased by 5.7%. Low interest rates, which allow you to keep mortgage rates at an acceptable level, along with the growth of the economy, have a positive impact on the residential real estate market, which remains insufficient, provoking an increase in prices. Most recently, a report was published where new homes sales in January rose by 7.9% at once.
The manufacturing activity of the Federal Reserve Bank of Kansas city increased in February of this year. The composite index rose to 5 points in February, against its -1 point in January.
As for the technical picture of the EUR/USD pair, a stop in the area of the 10th figure may lead to a downward correction at the end of this month and the beginning of next month. Today's fundamental data on Eurozone countries, especially on inflation and the labor market, may have a negative impact on the euro, but the demand for risky assets in the context of a sharp decline in the US stock market may continue. A breakout and consolidation above the resistance level of 1.1000 will open a direct path to the highs of 1.1050 and 1.1095. If traders do not force events, and the current growth is more of a speculative value, since the prospect of growth of the Euro zone economy at the beginning of this year raises a lot of questions, a downward correction in the pair will lead to an update of the lows of 1.0960 and 1.0930. A larger support level is seen in the area of 1.0900.
