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US Data Boosts Dollar against Euro and Yen

Posted by Joseph Trevisani on Jun 24, 2014 12:15:00 PM

Robust homes sales and consumer confidence gave the dollar an extended push in New York trading, though it remains close to the mid-point of its range for the past two weeks against the euro.

Sales of new American homes surged 18.6 percent in May to 504,000 at an annual rate, well beyond the 439,000 forecast and the highest total in six years.  The Conference Board index of consumer confidence, released at the same time as the housing information, registered 85.2 for June the strongest reading since January 2008.

Taken together the statistics seem to show an economy recovering from the its first quarter slowdown, with optimism returning to the housing market and most importantly to the consumer whose decisions drive the majority of economic activity in the country.

A better performing America will encourage the Federal Reserve in its belief that the economy can tolerate the complete withdrawal of quantitative easing support and makes future rate increases more likely and perhaps closer, policies supportive of a rising dollar.

The euro had already fallen from its European high of 1.3628 to 1.3617 just before the release at 10:00 am.

The decline accelerated reaching 1.3595 at 10:22 am, bounced back above the figure to 1.3604 before resuming its drop touching 1.3584 about 30 minutes before the London close. Over the past two weeks the euro has ranged between 1.3513 and 1.3644 with a mid point of 1.3579.

Dollar/yen climbed sharply higher on the news from 101.93 just in front of the issue to 102.16 within an hour.  The dollar then stabilized at the higher levels against both currencies.

Though both the housing and consumer confidence data are the best the markets have seen in over half a decade, in historical terms they remain well below long term averages.  The 30-year monthly average in new home sales, including both the housing bubble and the following collapse is 714,000 and that figures is not corrected for the continual increase in population over the pat generation. The three decade monthly average in the Conference Board index is 92.59, with highs of over 140.00 and a low of 25.3 after the recession.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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