Todays Econonmic News: From Your Orange County Loan Officer

Economic Data:

EUR / USD  1.3722  Up       0.0046
USD / JPY  90.520  Down  0.0050
GBP / USD  1.5130  Up       0.0073

OIL      80.74     Up   0.94
Gold  1,120.00  Up  16.60

Key Economic News:


The FOMC statement will obviously be the focus today, teed up by housing starts, import prices, and budget testimony with the ABC confidence poll finishing the day.

8:30: Housing starts and permits for Feb...setback? Weather probably held starts down in February, but other indicators - notably new home sales and the home builder index - don't look so hot either.
On starts, median forecast (of 71): -3.6%, ranging from -13.7% to +3.2%; last +2.8%.
On permits, medina forecast (of 48): -3.4%, ranging from -11.6% to +2.1%; last -4.9%.

8:30: Import/export price indexes for Feb...some relief from rising petroleum prices? That's what the median forecast expects, as the trend in nonpetroleum import prices has been about 1/2% per month lately. It should start abating.
Median forecast (of 49): -0.2%, ranging from -1.0% to +0.7%; last +1.4%.

10:00: Treasury Secretary Timothy Geithner testifies about the fiscal 2011 budget and economic outlook before the Hous Appropriations Committee...He will be joined by Budget Director Peter Orszag and Christina Romer, Chair of the Council of Economic Advisers.

14:15: FOMC decision...Markets are focused on any possible changes to the guidance that the economic situation is "likely to warrent exceptionally low levels of the federal funds rate for an extended period." We expect this key phrase to remain intact, though we do think tomorrow's statement will feature a few small changes, including 1) a slightly more upbeat tone on the economy, in particular the labor markets, 2) confirmation that asset purchases are about to end, along with language retaining some flexibility for the future moves, 3) reassurance that the wind-down of liquidity programs remains on schedule, including the approaching final auctions for the Term Asset-Backed Securities Loan Facility (TALF). We do not expect changes in language with respect to the inflation outlook - an area where the data have been quite soft recently - or further moves in the Fed's discount rate at this meeting. Nor do we anticipate that others will join Kansas City Fed President Thomas Hoenig in dissent, although that cannot be ruled out.

17:00: ABC consumer comfort index...stuck at low levels. The index is stuck - between -50 and -48 for the last eight weeks - and therefore so is our headline about it. The latest reading is -49.

Advice:

Housing starts - Starts sag while crude oil and dollar rebound pull import prices lower.
Housing starts sag as weather takes its toll. Declines in crude oil prices and the dollar's recent rebound hold down import prices.

Key Numbers:
Housing starts -5.9% in Feb (mom, +17.6% yoy) vs. median forecast -3.6%.
Housing permits -1.6% in Feb (mom, +11.3% yoy) vs. median forecast -3.4%.
Import prices -0.3% in Feb (mom, +11.2% yoy) vs. median forecast -0.2%.

I feel this morning the market will be similar to yesterday, but keep a close eye on the FOMC news coming out at 14:15est.

I would float today.

My position on MBS stays neutral today.

by: Neil Trenerry