Interest Rate/Currency Update

By Donna Heidkamp

This was a big week in the financial world with the FOMC meeting and monthly unemployment now behind us for the week. The FOMC meeting came out as expected with a unanimous decision to leave rates unchanged. As a result of many favorable economic reports recently released, I am biased in thinking that the Fed will eventually raise interest rates. Most notably, the housing market has come out with increasing sales numbers as well as mortgage applications over the past couple of months.

The weekly chain store sales came out lower than expected at -.9% versus the +.1% previously. The weekly chain store sales is derived from a select group of large chain stores. The Johnson Redbook retail sales report came out stronger than expected at +2.7% versus +1.6%. The Johnson Redbook reports the sales of approximately 85% of the department stores on a monthly level. Prior to the Fed decision the GDP was released at 3.5% versus 3.0%. The market is experiencing some inflationary pressures compared to the previous month, but it is not out of hand.

The monthly unemployment number came out lower than expected at +111,000 jobs compared to +150,000 expected. On the flipside, last month's numbers were revised higher to 206,000 jobs from 167,000 new jobs.

The trend is still pointing down for the March Ten-Year note even though the stochastics are indicating that the near term trend may be a little over sold and due for a correction.

Support: 105-28.0

Resistance: 106-29.5 - 107-02.5

Chart Copyright 2007 CQG, Inc.

Financial Reports for the week of February 5th - February 9th:

Monday: ISM Manufacturing Index - 9:00 am CST (expectation-57.0)

Wednesday: Productivity & Costs - 7:30 am CST (expectation-+1.3%)

API/EIA Energy Stocks - 9:30 am CST

Thursday: Weekly Jobless Claims - 7:30 am CST

Wholesale Trade - 9:00 am CST

EIA Gas Storage - 9:30 am CST

Friday: USDA Crop Production - 7:30 am CST