FOREX TRADING

Initial jobless claims for the week ending 01/09 will be released on Thursday January 14th at 8:30 AM ET and are expected at 437k. Initial jobs claims rose 1k during the week ending January 2nd to 434k, a reading of 447k was expected. The jobless claims report is important because last Friday’s report of an unexpected 85k decline in nonfarm payroll raises concern that the improvement in the labor market may have stalled. In addition, Fed policy is closely tied to the outlook for jobs with the Fed indicating that rate hikes are unlikely until jobs creation becomes sustainable. The jobs outlook will be key to the timing of the Feds rate hike cycle. Jobless claims have been trending lower and are at their lowest level in 16 months. The four-month moving average of jobless claims fell to the lowest level since mid-September. Despite the positive trend in jobless claims the US labor market remains weak. The Labor Department reported that job openings in US dropped by 50% in the last two years. In June 2007 there were 4.7mln job openings in the US and in November the number had fallen to 2.4mln. According to the Labor Department the number of job seekers outnumbers the available jobs in the US by 6 to 1. The jobless claims data and Labor Department report indicate that layoffs are slowing in the US but there is no sign of any significant pickup in hiring. The lack of jobs creation will have significant implications for the strength of the US recovery because it will limit consumer demand and may encourage the government to take additional steps to boost jobs growth. These steps could include a new jobs stimulus plan which could lead to increased pressures on the US budget deficit. According to the White House the stimulus plan has saved 2mln jobs. Most economists believe that a jobless claims decline below 400k would signal that jobs are being created in the US

December retail sales will be released on Thursday, January 14th at 8:30 AM ET. The December retail sales are expected to rise by 0.5% and ex. autos by 0.3%. Retail sales for November rose by nearly double what was expected reported up by 1.3%. The trade had expected November retail sales to rise by 0.6%. The rise in November retail sales reflected an increase in gasoline prices and auto sales. The cash for clunkers program helped to boost auto sales. Year-over-year retail sales are down 2.1%. The retail sales report is considered an important gauge of consumer demand and the outlook for the US recovery. The November retail sales report contributed to speculation that the Fed would elect to raise rates earlier than had been expected. A strong retail sales number in December may offset weaker jobs data and revive Fed rate hike speculation. Wednesday the Feds Plosser said that the Fed may have to hike rates as the economy improves even if unemployment remains high. Plosser said he expects the US unemployment rate to begin to decline by the end of 2010. A weak December retail sales number may encourage calls for more fiscal stimulus to boost domestic growth. Beige book says 2009 Christmas spending just beat 2008 but was far below 2007.

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