- New-home sales in the US are expected to ease in March
- US Consumer Confidence Index on track to dip, but remain close to 17-year high
- EUR/USD jumped to a five-month high after the French election on Sunday
The US housing market is in focus again today with the release of data on new-home sales for March. We’ll also see the April update of the US Consumer Confidence Index. Meanwhile, the euro will be closely monitored following EUR/USD's initial surge following France’s presidential voting on Sunday.
US: New Home Sales (1400 GMT): Sales of existing homes jumped to the highest level in more than 10 years in March, the National Association of Realtors reported last week. The news suggests that the housing market is set to provide a second-quarter lift for the economy after what’s expected to be a weak rise in first-quarter growth in the government’s preliminary GDP release on Friday.
“The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month,” NAR’s chief economist said last week.
Will today’s update on sales of newly built homes provide more support for expecting that the appetite for housing will heat up in Q2? The relatively cautious outlook doesn’t look promising. Econoday.com’s consensus forecast sees new-home sales easing to an annualised rate of 584,000 for March, down from 592,000 in the previous month. The estimate translates into a middling level of sales vs. recent history.
But bulls are quick to point out that the lion’s share of real estate transactions are in existing home sales. That leaves room for thinking that an unimpressive update on new homes today isn’t fatal for anticipating economic support from housing in Q2.
US: Consumer Confidence Index (1400 GMT): The public’s assessment of the US economy continues to hold on to most of the gains made in the wake of US President Donald Trump’s election last November. The crowd expects that today’s update from the Conference Board will reaffirm the upbeat trend in the April release of the Consumer Confidence Index (CCI).
Econoday.com’s consensus forecast anticipates that CCI will dip two points to 123.6 for this month, although the projection leaves the index close to March’s 17-year high.
Last week’s April update of the University of Michigan’s Consumer Sentiment Index shows that the mood remains upbeat this month, primarily because of the current conditions component, which rose to its highest reading since 2000.
Recent data on the mood suggest that consumer spending will perk up in the second quarter after falling in February and March, based on retail sales. Today’s CCI data looks set to provide a degree of support for thinking positively. If the index sticks close to March's reading, the news will help the market look beyond Friday’s Q1 GDP report, which is projected to show a hefty slowdown in economic activity.
EUR/USD: The euro staged a relief rally on Monday after centrist candidate Emmanuel Macron scored the highest share of votes in France’s presidential election on Sunday.
The second-place winner, eurosceptic Marine Le Pen, will face Macron (who supports globalisation and the European Union) in a run-off next month. Several polls currently point to a comfortable victory for Macron in the May 7 two-way contest, a view that’s cheered markets.
“Macron will not only help stabilise the European Union, but also help build stronger support mechanisms,” a senior economist for Europe at Schroders Plc in London advised in a research note. “The contest is not over yet, but investors are likely to take comfort and to begin to think about the more attractive valuations that European equities offer.”
Demand for the euro surged immediately after the election. At one point on Monday, EUR/USD rose above the 1.09 level for the first time since last November before pulling back later in the trading session.
Is the latest spike in EUR/USD the start of sustained rally for the single currency? Perhaps, but another Macron win next month is hardly a certainty and so it’s premature to conclude that the euro will strengthen from here. Nonetheless, a Le Pen victory now looks less likely, raising expectations that Europe’s beleaguered currency has dodged yet another bullet.
Whatever happens next, EUR/USD will be the go-to benchmark in the days ahead for assessing the market’s expectations for Macron's election prospects in next month’s vote. Based on the initial appraisal, his odds for electoral triumph look encouraging.
Disclosure: Originally published at Saxo Bank TradingFloor.com