Dollar Unfazed by Drop in Pending Home Sales and Hudson Employment Index

The US dollar has recovered from Monday?s sharp losses thanks to profit taking and position squaring ahead of the Independence Day holiday. Even though trading tomorrow should be quiet, traders should not become complacent, because we still have very important and market moving data scheduled for Thursday and Friday. The recent deterioration in the housing market makes job growth last month particularly important. Pending home sales dropped to the lowest level in 5 years during the month of May which suggests that existing home sales in June could continue to remain weak.

Potential homebuyers are either facing difficulty getting mortgages or are simply holding out for lower prices, neither of which provide a promising outlook for the housing market. However the long held belief has been that as long as people in the US have jobs, they will prevent the housing market from collapsing by continuing to service their mortgages. The market expects job growth to slow in the month of June, but economists may be underestimating the potential decline. The Hudson employment index plunged 6 points last month to 101.2, the lowest level of job growth in 9 months. This follows a drop in the employment component of the manufacturing ISM report that was released on Monday. Service sector ISM and the ADP release will shed more light on how bad Friday?s non-farm payrolls number could be, but at this point the leading indicators for payrolls that we typically look at suggest that job growth could be weaker than most people are expecting.