Australian dollar falls as US housing warms up

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DXY eased last night as EUR firmed and CNY fell:

The Australian dollar continues to fall versus DMs:

Mixed against EMs:

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Gold firmed:

Oil too:

Metals were mixed:

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Miners fell:

EM stocks eased:

Junk firmed:

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Treasuries rose:

Bunds too:

And Aussie bonds:

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Stocks firmed:

More US housing data last night indicating that the bond rally, which pegs US fixed mortgage rates, has already lifted activity. Existing home sales were strong:

Existing-home sales inched up in August, marking two consecutive months of growth, according to the National Association of Realtors®. Three of the four major regions reported a rise in sales, while the West recorded a decline last month.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.3% from July to a seasonally adjusted annual rate of 5.49 million in August. Overall sales are up 2.6% from a year ago (5.35 million in August 2018).

…Total housing inventory at the end of August decreased to 1.86 million, down from 1.90 million existing-homes available for sale in July, and marking a 2.6% decrease from 1.91 million one year ago. Unsold inventory is at a 4.1-month supply at the current sales pace, down from 4.2 months in July and from the 4.3-month figure recorded in August 2018.

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A few more charts from WSJ’s Daily Shot make the point. Mortgage activity has lifted:

And construction is following:

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Given US housing is the key leading indicator for any recession, its rebound catches the US dollar bears on the hop and is real support for a stable Federal Reserve.

The ECB has acted with more easing but transmission into European property markets is much more patchy and unpredictable. Germany has seen prices rise:

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But it’s not clear that it will translate into construction:

Economically, the US remains the developed market out-performer and the USD is still sought after. I would be surprised if this is not reflected in an even higher DXY in the short to medium term.

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Weighing, of course, on the Australian dollar.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.