US Existing Home Sales Reached Its High for Almost 4 Years

August 22, 2013

The US dollar was traded upwards on Wednesday against most major currencies before the publication of the FOMC Meeting Minutes and it grew after the publication. In spite of the fact that the opinions of Fed leaders on the terms of bond purchase reduce divided, most Fed leaders’ wide support of the Fed governor Ben Bernanke’s plan on tapering off of incentives became evident although the minutes didn’t contain any apparent hints on the terms of QE reduce start.

It can be said that the text of the meeting minutes turned out without surprises. There are almost no changes in the Fed leader’s estimates of the state of the economy. Almost all FOMC members agreed that there was no need to make changes in the asset purchase program yet. The outlook of finishing QE program still depends on the data. Asset purchases will have been over by 2014 if the economic situation develops according to the expectations. In the whole the minutes raised the expectations that the Fed would start tapering off the economy incentive program within the next several months. 

The dollar was supported on Wednesday by strong housing market data. Existing home sales grew by 6.5% in July compared with the prior month to 5.39 million houses at an annual rate, which turned out the highest reading for almost four years. A growth to 5.15 million houses was forecasted. Sales growth is likely to reflect consumers activity jump who want to close transactions before mortgage rates rise higher. Mortgage rate growth in the nearest weeks threatens to slow down the recovery rates of the housing market which is the US economic growth engine this year. 

The pound was traded upwards on Wednesday and updated August maximum again but had lost all the growth by the end of the day. Some support was provided by the CBI’s report. CBI Industrial Order Expectations anticipating industrial indicator reached zero level in August against -12 in July and improvement expectations to -8 points, which turned out the highest reading in 2 years. Industrial production grew to 25 in August – the highest reading since March, 2011 against 15 in July. Such growth indicates that economic recovery which has started this year is gathering pace.

The Australian dollar hit 2-week low on Wednesday Vs the US dollar amid the fall of Asian developing countries’ currencies and the leak at NPP Fukushima that was declared the accident of the third level of danger according to the International Nuclear Event Scale. The Canadian dollar fell to 6-year low Vs the US dollar amid commodity assets price decrease.

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