The U.S. Federal Reserve is expected to keep interest rates steady today, which has caused the U.S. dollar to dip slightly. The dollar rose by 0.20% against the Swiss franc but fell by 0.25% against the Japanese yen and 0.28% against the Australian dollar.

U.S. Mortgage and Housing Data

This week, U.S. mortgage applications fell by 2.6%, while the average 30-year mortgage rate saw a small decline. We’re also expecting building permits to rise to 1.428 million and housing starts to slightly drop to 1.357 million. Initial and continuing jobless claims are set to stay steady, as they were released early due to the Juneteenth holiday. Tensions are rising internationally, particularly concerning U.S.-Iran relations. In the stock market, U.S. futures suggest minor gains, crude oil is up by $0.29, gold has dropped by five dollars, and Bitcoin remains stable. Today’s updates aren’t surprising but rather confirm a settling mood in the market. The Federal Reserve’s steady approach has left the dollar drifting. Its decline against the yen and Australian dollar reflects domestic strengths in those economies and a lack of new momentum for the dollar. The core CPI figures from Europe indicate that inflation is stabilizing after stricter policies from Frankfurt. With inflation near target and rate cuts already happening, we are entering a phase where central bank help is more visible. Traders should focus on future guidance and balance sheet trends, not just overnight rates. Recent comments from Lagarde suggest patience rather than rapid changes. As rates become more favorable for growth, eurozone assets may draw more interest if economic activity continues.

Economic Activity and Market Reactions

In the U.S., the recent drop in mortgage applications isn’t alarming by itself, but it does raise awareness when looked at alongside upcoming housing data. If building permits go up, as expected, while starts drop slightly, it suggests the market is preparing for long-term demand while keeping costs in mind. Despite a slight weekly decrease, borrowing rates remain relatively high, so any housing recovery will require consistent rate cuts over the next few months. This timeframe is something to consider for policymakers. U.S. labor data, especially jobless claims, has been released early this week due to the holiday, and stable numbers are expected. A significant deviation would lead to immediate reactions in interest rate instruments. We’re looking for consistency rather than surprises, and the threshold for unexpected results is high. Overall market sentiment shows a slow rise in equity index futures, indicating cautious risk-taking. It’s not a rush to buy but a gradual approach. Crude’s modest increase suggests energy markets react more to supply issues rather than demand at this time. Meanwhile, gold’s decline seems connected to a slight improvement in dollar sentiment and reduced demand for volatility hedging. Geopolitical tensions, particularly regarding the Middle East, may impact asset prices soon. Although not yet reflected in market pricing, past trends indicate that safe havens could rise if news worsens. Volatility remains low but could quickly rise with changes in yields or inflation expectations. Create your live VT Markets account and start trading now.

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