USD Turns Bearish Today, As High FED Rates Hurt Home Sales

In the last two days, we saw a nice rally in the USD, as Treasury yields kept surging. But today we are seeing a reversal.

Skerdian Meta•Thursday, May 30, 2024•2 min read

In the last two days, we saw a nice rally in the USD, as Treasury yields kept surging higher. However, today we are seeing quite the opposite, with the Buck around 50 pips down across the board, as lower pending home sales send shivers through the market, with the idea that FED will be forced to start reducing interest rates soon.

Pending home sales showing a 7.7% decline in April

This significant decline in pending home sales indicates a notable slowdown in the housing market. Several factors could be contributing to this trend, including elevated home prices, broader economic uncertainties, but especially higher mortgage rates, induced by higher FED rates, that might be affecting buyer confidence and affordability. The sharp drop in the pending home sales index and the year-over-year decrease highlight the challenges facing the housing market. This downturn may have broader implications for the economy, given the importance of the housing sector as a driver of economic activity.

Pending Home Sales for the Month of April 2024

The latest data on US pending home sales for April shows a significant decline, with sales dropping by 7.7% month-over-month, sharply missing the expected decrease of 0.6%. This follows a 3.4% increase in the previous month. The pending home sales index fell to 72.3 from 78.2 last month, highlighting a substantial decrease in home buying activity.

Key Details:

Month-over-month change: -7.7% (expected: -0.6%)
Prior month: +3.4%
Pending home sales index: 72.3 (previous: 78.2)
Year-over-year change: -7.4% (previous: +0.1%)

The significant 7.7% decline in US pending home sales for April, the biggest in the last three years, underscores the impact of rising interest rates on the housing market. By the end of April, mortgage rates had increased sharply from 6.9% at the end of March to 7.7%. This rapid rise in borrowing costs is starting to weigh heavily on potential homebuyers, reducing affordability and demand.

The sharp declines in pending home sales were observed across all regions, with the South and Midwest experiencing the most pronounced drops. These regions typically have more affordable housing markets, so the effects of rising rates may be more immediately felt by potential buyers there.

Overall, the combination of rising mortgage rates and high home prices is creating significant headwinds for the housing market, likely contributing to the substantial decline in pending home sales. This trend may continue if borrowing costs remain elevated, potentially leading to further slowdowns in home buying activity and broader economic implications.

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Open a FREE Trading Account

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.