US construction spending surges in August
US construction spending in August showed a surprising uptick, largely driven by spending on nonresidential projects such as offices and power infrastructure. Despite this positive headline, the broader trend raises concerns as higher mortgage rates are suppressing homebuilding activity. This duality may create volatility in the dollar as market participants weigh the positive construction figures against the cooling housing market, which is critical ahead of upcoming economic data releases.
Where it sits in our coverage
Our consensus EUR/USD target currently sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). This mixed sentiment reflects a nuanced view of the current economic landscape in light of recent construction spending figures.
How firms align
Goldman Sachs supports a more optimistic view aligned with the uptick in construction spending, whereas Bank of America presents a more bearish stance reflecting concerns about the housing market's direction. For detailed positioning, see our internal reports pages for each firm.
What the data shows
The latest consensus highlights the contrasting nature of economic indicators, suggesting that the surprise increase in construction may not be enough to offset weak homebuilding trends. Recent research notes the necessity of robust housing data to support sustained dollar strength, see /research/construction-outlook for more insights.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Construction spending rose unexpectedly in August, driven by nonresidential projects.
- 02Higher mortgage rates continue to hinder the housing market's recovery, weighing on the dollar.
- 03A mixed economic backdrop suggests potential volatility for the dollar as traders assess data.
- 04Watch for housing data releases as critical catalysts for future market movements.
Market implications
Upcoming housing data releases will be crucial to gauge the dollar's strength, especially with consensus expectations at 1.075 for EUR/USD. A breach below 1.070 could signal increased bearish sentiment, while a rally above 1.080 may reinforce risk appetite.
Risks to this view
A significant downturn in construction spending or further rises in mortgage rates could rapidly shift market sentiment, forcing a reevaluation of the dollar's direction. Additionally, geopolitical tensions or economic surprises may shift this narrative.
Sentiment by currency
USD+EUR~JPY~GBP~Composite USD score: +0.55
Sources & References
How we cover this story