New home sales in the US leap to 539K (annualized), far better than expected and even unbelievable. This is a 7 year high and 7.8% above January, which was revised higher to 500K.
The US dollar, which was already moving up, extends its gains, but doesn’t go too far: EUR/USD trades under 1.0930 and GBP/USD is under 1.49.
Sales of new homes were expected to drop to an annual level of 466K in February from 481K in January (before revisions). Sales of new homes create a wide array of economic activity, even though they consist only a small part of home transactions.
The Fed described the housing sector as experiencing a slow recovery. This looks different, but could be a one-off.
The dollar was strengthening towards the publication, riding on stronger inflation data.
All inflation figures came out better than expected, with the key y/y Core CPI rising to 1.7%, very close to the Fed’s target. And just before the release, Markit’s flash manufacturing PMI beat expectations with a rise to 55.3 points.
At the same time, the Richmond Manufacturing Index fell to -8 points, much worse than +2 points expected. Nevertheless, this is a minor figure and is brushed away with the new home sales release.
The dollar suffered from a losing streak of economic indicators disappointing, and from a more dovish tone from the Fed. While there is still a chance of the Fed hiking in June, the path of interest rate hikes is expected to be very slow.
More:
- Greater Uncertainty Now Infects The Dollar’s Path – JP Morgan
- 3 Reasons Why Selling EUR/USD Still Attractive – RBS
