US Housing Starts likely to Stall as January Weather Plays Spoilsport
US Housing starts for the month of January are due to be announced on Wednesday, January 19th. The monthly data released by the U.S. Commerce department is a crucial indicator that throws light on the strength of the economy by gauging the growth in the housing market and evaluating the annualized increase in new residential buildings.
According to preliminary estimates, housing starts for the month of January are expected to come in at 950k units from the same period a year earlier, down from 999k units in December. The decline in housing starts is partially blamed on the severe weather conditions in the U.S., which saw temperatures in January dip to the lowest level in two decades. The data has been very inconsistent over the last few months with the numbers fluctuating between 890k and 1.1 million units.
On the currency front, a decline below 950k units could have a negative impact on the US dollar with the biggest beneficiary being the EUR/USD. The pair could break out of crucial resistances at 1.3750- 1.3780 and rally to 1.4000, last seen in November 2011. On the other hand, a reading around 950k and higher could be dollar neutral with the EUR/USD likely to oscillate in the 1.3650- 1.3750 range.
The following chart illustrates US housing starts for last year along with the estimated figures for January
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