US Existing Homes Sales Rise

21 April, 2016

FX News Today

European Outlook: Asian stock markets outside of mainland China rallied as risk appetite picked up with oil prices. The Nikkei is up 2.4% and US. and UK stock futures are also moving higher, which will likely see Bund and Gilt futures shedding some of yesterday’s gains. Improved risk appetite should also help to bring in Eurozone spreads ahead of the ECB meeting. Draghi is widely expected to stay put for now, but highlight uncertainty and keep the door open to further action down the line if necessary. The calendar also has U.K. retail sales and public finance data as well as French business confidence.

Oil producer meeting in Russia in May: This idea was fostered by remarks from the Iraqi Deputy Oil Minister, who also said Iraq expected to hold oil exports steady at 3.9 mln bpd in May and also forecast prices rising slowly despite the Doha impasse. This apparently was behind the sudden knee-jerk rebound in crude oil, despite the end of Kuwaiti strikes and reported build in EIA crude inventories. Overnight Russia said it had no plans to decrease output, however, and swing producers the Saudis and Russians remain key to the Gordian supply knot. Brent is currently trading over $46 per barrel and WTI over $44 per barrel after the EIA predicted the biggest fall in non-OPEC oil production in a generation.

US Existing Homes Sales Rise: The 5.1% March US. existing home sales bounce to a 5.33 mln clip mostly reversed the February drop to a disappointing 5.07 (was 5.08) mln pace to leave an in-line report, with additional expected gains of 5.0% for the median price that initiated the usual Spring increase, and 5.9% for inventories to a still-lean 1.98 mln level. Existing home sales have largely defied an assumed winter lift from mild weather, and remain below the 5.48 mln cycle-high pace last July. We still have only a moderate and erratic housing recovery, and we expect a restrained 5% 2016 existing home sales increase after a 6.5% 2015 rise, but a 2.9% 2014 post “taper-tantrum” drop. We have cyclical increases of only 54% for existing home sales and 43% for pending home sales, versus larger cyclical gains of 90% for new home sales, 128% for housing starts, and 112% for permits.

BoE MPC hawk McCafferty hints he may vote for a hike: McCafferty had previously voted for a quarter point rate hike from August 2015 through to January this year, before returning to the fold from February, voting to leave the repo rate unchanged at 0.5% in every meeting since. In a speech today he cited “fears about the global economy” and “disappointingly weak growth in nominal wages and other domestic prices” as causing him to stop arguing for tightening. Now, however, he says that while “the appropriate timing for starting the process of policy normalisation has been delayed, the benefits of a gradual rise in interest rates once we start remain, to me, convincing,” and, “I still anticipate having to return to a vote to tighten monetary policy at some stage, although I cannot offer a firm date as to when that might occur.”

Main Macro Events Today

ECB Outlook: Draghi is widely expected to keep monetary policy unchanged at today’s council meeting. Indeed, with officials stressing that helicopter money may be an interesting academic idea but is not under serious consideration and the ECB focused on implementing the measures already announced the central bank is seen on hold for an extended period. With growth slowing down in core countries and the Brexit referendum adding to uncertainties, hopes of further action down the line remain, even if helicopter money may be too much of a leap. For now though the ECB remains on hold and at the moment September seems the earliest for a serious policy review.

US Initial Jobs Claims: Claims data for the week of April 16th are out Thursday and should reveal a 252k (median 264k) headline that remains about unchanged from last week’s 253k. Claims look poised to average a slightly stronger 263k in April, compared to 264k in March. We expect April employment to post a 210k headline versus a 215k figure for March with the unemployment rate ticking down to 4.9% from 5.0% in March.


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