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Dollar Returns to Strength Despite Signs of Cooling U.S. Housing Market

2018-8-24 10:05:30Basics of Trading
Dollar Returns to Strength Despite Signs of Cooling U.S. Housing Market

The dollar found its footing against its rivals Thursday, shrugging off weak U.S. economic data, as renewed focus on the U.S-China trade war and expectations for further Fed rate hikes lifted the greenback.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.45% to 95.42. The dollar was set to snap a five-day losing streak.

The wobble in U.S. housing market continued after sales of new homes in the U.S. unexpectedly fell in July to a 9-month low. Rising building material costs and a shortages of land and labor have tightened the supply of houses available for sale, keeping prices elevated and deterring buyers.

The Commerce Department said Thursday new home sales fell 1.7% to a seasonally adjusted annual rate of 627,000 units last month, the lowest level since October 2017. That missed economists’ forecasts.

The housing market data arrived as investors were digesting a fresh round of tariffs between the U.S. and China on each other's goods that went into effect Thursday, prompting investors to back the dollar amid a strong U.S. economy.

The greenback was also supported by ongoing expectations that the Federal Reserve will meet expectations and raise interest rates next month.

The minutes of the Federal Reserve, released Wednesday, showed officials were content for further increases in interest rates on expectations for ongoing above-trend growth. Further clues on monetary policy may arrive on Friday courtesy of Federal Reserve Chairman Jerome Powell, who is on the slate to deliver a speech at in Jackson Hole, Wyo.

The dollar's return to strength steepened losses for the pound, which fell about 0.70% against the greenback.

Elsewhere, EUR/USD fell 0.32% to $1.1559 as European services and manufacturing data undershot economists' estimates.

USD/JPY rose 0.60% to $111.22, while USD/CAD gained 0.48% to C$1.3059.