Interest Rate Roundup

Thursday, April 26, 2007

Looks like I picked the wrong week to stop sniffing glue

I love that quote from the movie Airplane, and it certainly applies to this week! Between all my normal work and everything else, I didn't even have time to blog today. That hurts given all the home builder earnings reports, mortgage lender earnings reports, crazy interest rate and currency moves, and more. Since it's already late in the day, I'll just cover a few things quickly ...

* Tomorrow is a potentially huge day for the currency and interest rate markets. You see, the dollar has been getting beaten like a rented mule for weeks on end. Meanwhile, bonds have bounced and interest rates have slipped a bit -- not by much, but enough to get noticed. The basic forces driving these trades: The economy is weak here and strong overseas ... The Fed is on hold, or even prepared to cut, while foreign central banks are in full-scale hiking mode.

Within the last 36 hours, those trends started to reverse; The dollar caught a bid and bonds sold off. This is happening with the dollar challenging multi-decade lows against the pound and all-time lows against the euro.

That makes tomorrow's U.S. GDP report for Q1 2007 extremely important. The consensus of economists polled by is for 1.8% growth, down from 2.5% in Q4 2006. If this number comes in 0.5% or so on either side of that mark, we could see a major move -- up in the dollar, down in bond prices if the economy was stronger than expected ... down in the dollar, up in bond prices if the economy was much weaker. And if the move is down, it would likely send the dollar through several key technical levels for once and for all. So fasten your seatbelts.

* I'll sum up the batch of home builder earnings reports thusly: The news pretty much stunk. But the stocks all rallied because one company said that things might, kind of sort of be getting ever so slightly better in a few places. You have to admire Wall Street's tenacity. They love to bottom fish in these stocks -- even though doing so last summer proved anything but rewarding.

* One reason I wasn't around as much today was that I had to tape a segment for CNN's Open House show. If you're interested, you can catch it this Saturday morning at 9:30. I covered current market conditions, while an expert from, Greg McBride, talked about tips for home buyers and mortgage holders.


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