Watch for the Greenback to Grow

The U.S. jobs report caps a string of impressive data that should but probably won't silence the pessimists. Already the unseasonably warm weather in the U.S., particularly in the Northeast, is being cited by some to dismiss the recent stability of new- and existing-home sales and the stronger-than-expected employment data.

It's unlikely that one of the biggest bond fund managers would change his call for 100 basis points in cuts from the fed funds rates this year. Nor will many of the more aggressive economists at some of the investment houses who make their mark with their unceasing ability to find a cloud in every silver lining change their tune.

Nevertheless, the recent economic data reinforce my more optimistic outlook. I suspect the consensus is using the wrong verb tense here. The U.S. economy is not slowing down. Rather, it slowed down and now appears to be poised to reaccelerate.

The verb error also applies to the euro zone and Japan. Those economies are not accelerating but rather accelerated previously and now are moderating.

Less of a Home Sales Headwind

There were two widely recognized and well-documented headwinds to the U.S. economy: housing and autos and their related sectors. Those headwinds may not have disappeared, but their drag has lessened.

New-home sales rose 3.4% in November, more than twice what the consensus expected, and stand almost 7% above the trough set in July. Existing-home sales were expected to decline in November. Instead, they rose 0.6%, the second consecutive monthly rise after a run of consistent declines since April. The most recent mortgage application number, while reflecting volatility at the end of 2006, is more than 10% above the trough set in October.

My argument isn't that the housing market has definitely bottomed. Rather, I make a more modest claim: that the housing market will not subtract as much from growth or sentiment as it has.

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Marc Chandler has been covering the global capital markets in one fashion or another for nearly 20 years, working at economic consulting firms and global investment banks. Currently, he is the chief foreign exchange strategist at Brown Brothers Harriman. Recently, Chandler was the chief currency strategist for HSBC Bank USA. He is a prolific writer and speaker and appears regularly on CNBC. In addition to being quoted in the financial press, Chandler is often a guest writer for the Financial Times. He also teaches at New York University, where he is an associate professor in the School of Continuing and Professional Studies. While Chandler cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.