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By xemarketanalysis June 16, 2017 11:10 am
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    XE Market Analysis: U.S. Housing Market Shows Further Signs of Slowing

    OVERVIEW

    • U.S. housing starts fell 5.5% and building permits fell 4.9% last month.
    • U.S. consumer sentiment dipped in June with the Uni Michigan index dropping from 97.1 to 94.5.
    • Bank of Japan keeps interest rates on hold and rules out from an early exit from its stimulus due to weak inflation.
    • Eurozone inflation data confirmed headline CPI slowed to 1.4% in May and the core rate was just 1%.
    • Greece and its creditors have finally reached an agreement to enable it to receive the next tranche of €8.5bn in loans.

    HIGHLIGHT

    Oil prices are approaching their lowest levels of the year as supply continues to increase, despite OPEC's attempts to limit supply and support prices. Lower energy prices are likely to hamper global central bank's efforts to boost inflation towards 2%, as seen in some of the latest CPI data in Europe and the U.S.

    US DOLLAR

    The Dollar has given back most of its gains following the Federal Reserve's rate decision where they brushed off concerns about softer inflation and growth. The market remains unconvinced that the Fed will need to hike rates. Today's data on the housing market that showed homebuilding fell for a third straight month in May has done little to encourage that view. U.S. political risks also remain high, with Trump now under investigation over obstruction of justice, while now threatening to fire the man running that investigation.

    BRITISH POUND

    The Pound is holding up quite well considering there is still no agreement yet between the Conservatives and the DUP, meaning there is still technically no government. Yesterday's 5-3 surprise vote to keep interest rates on hold (7-1 expected), is likely to add further support to the Pound in the weeks ahead, though Brexit remains a significant challenge and potential risk to the currency's value.

    EURO

    The Euro is struggling to break back above the 1.12 level as inflation data continues to support the more dovish ECB members (including President Draghi). Wage growth data also highlighted the efforts needed to put inflation back on a self-sustaining path as they rose just 1.4% year-on-year.

    CANADIAN DOLLAR

    The Loonie is flat on the day but is on course for its largest one-week gain versus the Dollar since December after the Bank of Canada signaled a rate hike was likely to happen a lot sooner than previously indicated. 

    AUSTRALIAN DOLLAR

    The Aussie Dollar is set to close the week at its highest levels versus the Dollar since March following the stronger than expected employment data. The continued strength of the jobs market could bring forward expectations for a rate hike from the RBA, though inflation and wage growth remain soft. The pair looks set to remain within a long-term range of 0.72-0.78 cents. 

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