The median sales price of a new home fell to a new four-year low of $218, 400, the US Census Bureau announced today.

The value of US consumers’ homes is closely related to their wealth, consumer confidence and consumer spending. While prices continue to fall there seems to be little hope of a near-term economic recovery.

The headline New Home Sales number beat analyst expectations of 452K, coming in at 464K annualized. This represents a 2.7% increase from August’s downwardly revised 452K sales. However, sales are still 33.1% lower than at the same time last year.

Contracting prices does seem to be restoring some demand to the housing market with 7.3% shaved from the inventory of unsold homes. At the current sales pace it would take 10.4 months to clear the 349K strong inventory. This is considerable better than the 11.4 months seen in August.

Sales in the West saw the biggest increase up to 108K from 88K previous while the South climbed to 269K from 267K in August. Sales in the Mid-West and North-East contracted, down to 65K and 22K from 69K and 28K respectively. The drop of 21.4% seen in the North-East brings the region to a record low annual sales pace.

Existing Home Sales in the United States outpaced economists’ expectations in September as they rose by the fastest pace in five years, the National Association of Realtors reported today.

Sales in September increased to 5.18 million units annualized, a MoM increase of 5.5%. 5.18M is the highest number seen since the 5.50M seen in August 07.

Sales in the West grew by the largest margin, up 16.8% on the month, 34.4% on the year. The Midwest managed a 4.4% gain with the South registering 2.2%. The Northeast was the only region in negative figures, down 1.2% on the month.

The positive news of an increase in sales was slightly diminished by the lowest median price of a previously owned home seen in four years. Down 9.0% on the year the median price now stands at $191, 600.

The largest fall was seen in the West with prices off by 18.5% on the year, followed by the Midwest down 7.9%. Median prices in the Northeast are down by 5.4% to $246, 800.

Canadian Core CPI and Headline CPI both beat analyst forecasts in September but overall inflation has begun to slow on a yearly basis, Statistics Canada reported today.

Headline Consumer Price Index came in at 0.1% MoM compared to the -0.1% that had been expected for September. This brought the yearly number to 3.4%, down from 3.5% in the previous month. August’s reading had been the highest in more than 5 years.

The slowing of prices was due in most part to Shelter (down 0.6% MoM), Clothing and Footwear (down 0.3% MoM) and Transportation (down 0.6% MoM) on a seasonally adjusted basis.

Core CPI, which strips out the most volatile items, increased by 0.4% MoM, better than the 0.3% that had been expected. On a yearly basis Core CPI now stands at 1.7%, unchanged from the previous month.

Will today’s data influence the BOC at their next interest rate meeting on December 9th? Probably not. The BOC’s primary concern is the dwindling economy and falling commodity prices. The Bank sees inflation falling below 1.0% over the coming year.

This week’s BOC Interest Rate Statement saw the Overnight rate cut by 0.25% to 2.25%. The USD CAD climbed to its highest level since May 2005 today, recording a high of 1.2841.

The Bank of England’s MPC voted unanimously to cut rates by 0.50% to 4.50% on October the 8th as part of the coordinated move by major central banks.

BOE Governor King briefed the committee on discussions with other major central banks and asked them whether they wished to support the action.

The Monetary Policy Committee has decided that the recent credit market turmoil has reduced the risk of increasing inflation in the English economy. “All these developments pointed to the need for a relaxation in monetary policy. In the current financial market turbulence, the reduction in Bank Rate that would ultimately be required to meet the inflation target was very difficult to gauge.”

This news comes as no real surprise to economists with BOE Governor King’s speech last night dominating headlines.

King admitted that the UK economy was probably already in recession, for the first time in 16 years.

“Not since the beginning of the First World War has our banking system been so close to collapse,” said King, frankly. Traders are already pointing to the use of the word ‘recession’ as an indication of yet more interest rate cuts to come. The market is currently anticipating another 50 basis point cut at the November meeting.

Since King’s comments and the MPC Meeting Minutes the Pound Sterling has fallen to a five-year low against the Dollar reaching 1.6134 in New York trade.

Last Week
Global markets stabilised a little last week as fears of a worldwide market meltdown were eased. Words of support from world leaders began to transform into solid action plans and in some cases actual cash injections.

However, worries over global recession were remembered after a host of poor economic data, especially from the US. Traders were especially worried about US Core Retail Sales, Retail Sales, Building Permits and Housing Starts. All four economic indicators missed expectations and this was reflected by the Michigan Consumer Sentiment number which fell from 70.3 to a lowly 57.5.

This Week
The economic calendar is slightly lighter than normal this week which may keep both stock and forex markets in consolidation. Key events will be the RBNZ and BOC Interest Rate Statements, Bernanke testimony and the BOE Meeting Minutes.

The first high volatility event of the week come from Australia at 01:30 Monday morning. The Australian PPI is expected to come in at 0.9%, compared to 1.0% in the previous quarter.

Later the same day we will see probably the most highly anticipated US event of the week with Bernanke’s testimony before the House of Representatives Budget Committee at 15:00.

At 22:45 we will see QoQ CPI data from New Zealand. Inflationary pressures are expected to moderate slightly from 1.6% previously to 1.5%.

Tuesday will begin with more high volatility from Australia. The October 7th Interest Rate Meeting Minutes are expected. Traders will be very interested in the discussions that took place at a meeting where the RBA surprisingly by cutting a full 100 basis points to 6.00%.

At 03:10 RBA Governor Glenn Stevens is expected to bring more high volatility to the markets when he speaks about the international economy in Sydney.

The BOC Interest Rate Statement is due at 14:00 with a 0.50% cut expected. This will bring the Overnight Rate to 2.00% from 2.50%. This will mean that the BOC has cut the rate by a full one-percentage point in the last 14 days.

We will see some late volatility from the UK as BOE Governor Mervyn King speaks in Leeds. He is due to speak at 20:10 UK time.

The flurry of Australian data continues on Wednesday with the Australian CPI. Economists are expecting an AUD negative release with 1.0% consumer inflation compared to 1.5% in the previous quarter.

At 09:30 we will hear from the BOE Monetary Policy Committee with the BOE Meeting Minutes (visual analysis) release. It is expected that the MPC voted unanimously to cut rates by 0.50% on October 8th as part of the coordinated global move.

The USD/ CAD will be in focus at 13:30 with Canada’s Core Retail Sales expected to crate high volatility. Core sales are expected to moderate slightly down to 0.3% growth in September from 0.4% in August.

Wednesday is rounded off by the second central bank rate announcement of the week. The RBNZ Interest Rate Statement is due at 21:00 with the Official Cash Rate likely to be cut by 1.00% from 7.50% to 6.50%. This mirrors the actions of the RBA earlier in the month who also cut by 1.00%.

The first high volatility event of Thursday will be from the UK. Retail Sales is due at 09:30. This data has been highly volatile of late and this trend looks set to continue. Retail Sales for September are expected to have fallen by 0.8% in September when compared to a 1.2% increase in August.

The Bank of Canada will take the spotlight for the second time in a week on Thursday. The BOC Monetary Policy Report is due at 15:30 and BOC Governor Carney will hold a press conference on the same topic at 16:15.

On Friday morning we are due to see preliminary GDP data from the UK. Gross domestic product is expected to show negative growth of 0.2% after the previous quarter’s number of 0.0%.

Canada’s Core CPI (visual analysis) is due at 12:00 with growth in September expected to mirror that of August at 0.3%. Traders pay most attention the Core number and so does the BOC.

To round off the week we have Existing Home Sales (visual analysis) from the US. This release will also be supported by our visual analysis and historical data tool. The sale of existing residential homes is expected to have increased slightly in September with 4.95M units sold compared to 4.91M in August.

US Core CPI recorded its smallest MoM increase since February as it crept up by 0.1% in September, the Labor Department reported yesterday.

Core inflation, which strips out food and energy, had been expected to rise by 0.2% MoM. As it stands, third quarter Core CPI registered a 2.7% increase which leaves the un-adjusted 12 month rate at 2.5%.

Core CPI suffered from a 0.6% decline in transportation prices, and smaller declines of 0.1% in housing and apparel. Medical care, recreation and other goods and services registered 0.3, 0.2 and 0.2% gains respectively. The education and communication component was also up, by 0.1%.

Elsewhere the headline Consumer Price Index came in flat at 0.0% for the month of September. This is an improvement on August’s -0.1%. All items CPI still stands at an un-adjusted 4.9% YoY.

The energy index continued to decline in the month of September with a MoM decrease of 1.9%, better than August’s -3.1%. However the index is still up 23.1% on the year.

The cost of food continues to increase, up 0.6% MoM, 6.2% YoY. The food index was helped by food at home (up 0.6%); cereals and bakery products (up 1.1%) and meats, poultry, fish and eggs (up 1.0%).

The US Producer Price Index fell by 0.4% as expected in the month of September, the Department of Labor reported yesterday.

This is the second straight MoM decrease after it fell 0.9% in August. The annual rate now stands at 8.7%, down from the 9.6% seen in August.

Leading the index lower once again was energy. Prices in September declined by 2.9% after the drop of 4.6% in August. Crude goods were down 7.9% while intermediate goods fell 1.2%.

On closer inspection, the energy sector was hit by home heating oil and liquefied petroleum gas, down 13.9% and 11.1% respectively. Natural gas prices fell by a record 8.2%.

Core PPI, on the other hand, beat analysts expectations and posted a 0.4% MoM gain. This represents double what the market had been expecting. Over the past 12 months the Core index now stands up 4.0%, the fastest rate since February 1991.

The BOE Interest Rate Statement is due on Thursday October 9th at 12:00 UK time. Following the shock 1.00% rate cut from the Reserve Bank of Australia, the BOE’s release will be more highly anticipated than usual.

Economists have been expecting a cut of 0.25% from the BOE which would reduce rates to 4.75%. However, economists had only been expecting a half-point cut from the RBA. Speculation is growing over whether we will see a coordinated, significant cut from the BOE this week and the Fed on October 29th.

This video takes a look at the short-term areas of support and resistance that may cap price action in the GBP/USD until the interest rate statement on Thursday.

Watch a higher resolution version of our UK Interest Rate Preview here.

IMPORTANT NOTICE: These comments are for information purposes only. The information contained on this document does not constitute a solicitation to buy or sell by passion-trading.com, and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law. Opinions, market data, and recommendations are subject to change at any time. Forex trading involves substantial risk of loss and is not suitable for all investors.

Chart of the Day for October 7th 2008 takes a look at the Australian Dollar (AUD). After the shock 1.00% RBA interest rate cut we take a look at the long-term picture and use technical analysis to identify a strong area of demand that is coming into play and supporting the market. We also have 50% and 61.8% Fibonacci Retracement levels to contend with.

Follow this link to watch a high-resolution version of the AUDUSD Technical Analysis video or play the video below.

IMPORTANT NOTICE: These comments are for information purposes only. The information contained on this document does not constitute a solicitation to buy or sell by passion-trading.com, and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law. Opinions, market data, and recommendations are subject to change at any time. Forex trading involves substantial risk of loss and is not suitable for all investors.

The Reserve Bank of Australia surprised investors over night by cutting the Cash Rate to 6.00%, a full 1.0% cut. The market had been expecting a 0.50% cut to 6.50%.

Last night’s rate change was the largest since December 1994 and it sent the AUDUSD tumbling to an overnight low of 0.7025, re-testing yesterday’s low of 0.6982. This represents the lowest price since September 2004.

Since then price has rebounded to a current high of 0.7355 in early London trade. This is a sign that demand has entered the market once again, at least temporarily.

In the accompanying statement, RBA Governor Glen Stevens said “conditions in international financial markets took a significant turn for the worse in September.”

“Demand and output could be significantly weaker than earlier expected.” He added, “an unusually large movement in the cash rate was appropriate in order to bring about a significant reduction in costs to borrowers.” However, this will not be a pattern for future rate decisions.

Elsewhere the BOJ kept rate unchanged at 0.50%, sighting a sluggish economy. The vote to maintain the overnight rate was unanimous as expected. “While carefully monitoring movement in global financial markets, we will continue to strive to maintain market stability.”