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Dollar Rides New Home Sales Surge Higher; Euro, Sterling Slips

4/24/2019, 2:05:14 PMMarket Analysis
Dollar Rides New Home Sales Surge Higher; Euro, Sterling Slips

The dollar rose against a basket of major currencies Tuesday as new home sales surged to a 17-month high, suggesting resilience in the U.S. housing market after disappointing existing home sales numbers.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.38% to 97.33. The index is up 0.5% so far in April and 1.66% for the year after a 4.3% gain in 2018.

The Commerce Department said new home sales rose 4.5% to a seasonally adjusted annual rate of 692,000 units last month, the highest level since November 2017. That was well above economists’ forecasts for a decline to 647,000 units.

The uptick in the new home sales comes as amid outperformance in the South and Midwest in the U.S. as the "watering down of the (state and local tax) deduction and mortgage interest deduction has likely accelerated the population migration from high-cost, high-tax states," Amherst Pierpoint said.

The dollar's surge higher was also helped by weakness in both the euro and sterling.

GBP/USD fell 0.32% to $1.2940 as Brexit-related angst continued with little sign of a breakthrough in talks between British Prime Minister Theresa May and opposition leader Jeremy Corbyn.

EUR/USD fell 0.39% to $1.1211.

USD/JPY fell 0.11% to Y111.81, but downside was limited as risk-on sentiment limited demand for the safe-haven yen.

USD/CAD rose 0.71% to C$1.3434 a day ahead of the Bank of Canada monetary policy decision. The central bank is expected to leave rates unchanged at 1.75%, but the bank will leave the door open to possible tightening, according to Manulife Asset Management.

“Full capitulation like we’ve seen from the Federal Reserve or the European Central Bank in my view is unlikely,” said Frances Donald, head of macroeconomic strategy at Manulife.