THE TAKEAWAY: Higher interest rates continue to deter home buyers > Housing momentum slowing > EURUSD BULLISH
After June’s housing data were disappointing on the whole, it was quite clear that the surge in US Treasury yields since early-May has had a negative reverberation throughout the broader economy. The pressure US homebuyers faced in June continued in July, with a second consecutive month of disappointing housing data hurting the US Dollar.
Here’s the data having an impact today:
- Building Permits (JUL): 943K (+2.7%) versus 945K (+2.9%) expected, from 918K (-6.8%) (revised higher from 911K (-7.5%)) (m/m)
- Housing Starts (JUL): 896K (+5.9%) versus 900K (+7.7%) expected, from 846K (-7.9%) (revised higher from 836K (-9.9%)) (m/m)
During July, the national 30-year average mortgage rate, according to Bankrate.com, opened and closed at 4.39%, but jumped to as high as 4.64% on July 5. In June, this rate increased from 4.10% to 4.39%, a +7.07% monthly increase; and in May, the same mortgage rate rose by +19.53%, from 3.43% to 4.10%. At the time of writing, the 30-year average mortgage rate was at 4.52%.
Given the implication that borrowing costs are rising, a further sustained increase in US yields has negative implications for the US housing market, and thus, for the US Dollar. Already today, US Dollar weakness has transpired in the wake of the soft housing data.
EURUSD 1-minute Chart: August 16, 2013
Charts Created using Marketscope – prepared by Christopher Vecchio
Following the data, the EURUSD jumped from $1.3336 to as high as 1.3367, but had fallen back to 1.3362 at the time of writing. Price action was similar in the other components of the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR), insofar as modest USD weakness developed against the Australian Dollar, the British Pound, and the Japanese Yen.
--- Written by Christopher Vecchio, Currency Analyst
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