US pending home sales tumble to record low in September
The latest US pending home sales data revealed a significant drop, plummeting to a record low in September, principally driven by rising mortgage rates dampening housing demand. This contraction not only reflects immediate weaknesses in the housing market but also points toward broader economic vulnerability. As the labor market shows signs of imbalance, this data could further fuel market speculation about the Federal Reserve's tightening stance, suggesting less impetus for future rate hikes and leading to an overall bearish sentiment for the USD in the near term.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). Reuters' take aligns more closely with the upper third — JPMorgan shares a similar stance, indicating concern about the implications of this housing data on economic growth and Fed policy.
How firms align
JPMorgan is aligned with this outlook, projecting a target of 1.10 for the EUR/USD as they consider monetary policy implications stemming from the latest housing data. Conversely, BofA stands in opposition, maintaining a more pessimistic target of 1.04, suggesting potential resilience in the USD despite current data trends.
What the data shows
The weakening housing market could lead firms to adjust their economic forecasts, as seen in recent adjustments that anticipate a softer economic landscape. For further insights, refer to our research on housing indicators and their impact on Fed policy at /research/housing-impact.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Contracts to purchase homes reached a record low, signaling economic cooling.
- 02Rising mortgage rates are likely to temper US consumer sentiment and spending.
- 03Anticipate a shift in Fed rate hike speculation with weaker housing data, target 1.075.
- 04Diverging views across firms highlight market uncertainty.
Market implications
Expect traders to monitor economic indicators, particularly next week's inflation data, as it could influence sentiment about the Fed's policy outlook. A breach of 1.070 in EUR/USD could attract additional selling pressure on the USD.
Risks to this view
Should the Fed indicate a hawkish shift due to unexpected economic resilience or a reversal in employment trends, this could rapidly invalidate the current bearish stance on the USD.
Sentiment by currency
USD EUR~JPY~GBP~Composite USD score: -0.35
Sources & References
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