US existing home sales slump to more than 16-year low in October
US existing home sales have plummeted to their lowest levels in over 16 years, primarily driven by rising mortgage rates and persistently high housing prices. This slump could signal a broader slowdown in the housing market, impacting consumer sentiment and spending. The implications for the USD are significant as weaker housing data may prompt a reassessment of interest rate expectations, particularly as the Fed weighs its future monetary policy amidst high inflation.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075, with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The headline from Reuters supports a cautious view on USD sentiment, aligning with forecasts suggesting a potential pullback in the dollar if housing data continues to weaken.
How firms align
Aligned with the headline sentiment, JPMorgan maintains a target of 1.10 for EUR/USD, reflecting expectations of a dollar re-evaluation. In contrast, BofA's stance at 1.04 suggests bearishness, indicating a potential divergence in outlooks among key firms in our coverage. Refer to our internal reports for detailed positioning.
What the data shows
Recent forecast revisions suggest a trend toward lower growth estimates in the housing sector, with implications for broader economic confidence. Insights from /research/housing-outlook provide context on consumer behavior related to housing affordability and interest rates, reinforcing fears about economic slowing.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01US home sales hit a 16-year low, hinting at potential economic slowdown.
- 02Weak housing data could affect USD sentiments; traders might adjust positions.
- 03Watch for Fed commentary as market anticipates rate effects on housing.
Market implications
Investors should monitor the upcoming housing market data releases, specifically focusing on any further declines in sales or shifts in mortgage rates. A sustained drop could push the consensus EUR/USD closer to our 1.075 target as the market digests potential changes in Fed policy considerations.
Risks to this view
A reversal of this view could occur if unexpected economic data indicates resilience in the housing market, or if mortgage rates stabilize, surprising markets and retaining consumer demand. Any shifts in Fed communication towards tighter monetary policy could also bolster the USD.
Sentiment by currency
USD+EUR~JPY~GBP~Composite USD score: +0.35
Sources & References
How we cover this story