The US dollar is weakening against many of its G10 currency counterparts on Tuesday as poor housing data and federal testimony weighed down the greenback. After Monday’s huge 900-point rally, financial markets are taking a breather as investors consider the post-coronavirus economy and look to other countries that may be witnessing a resurgence in infections.
According to the US Census Bureau, housing starts plummeted 30.2% in April to its lowest level since February 2015. At an annualized rate, housing starts slumped 29.7%. Housing start declines were reported nationwide, led by the West (-43.4%), Northeast (-42.6%), South (-26%), and Midwest (-14.9%).
Last month, building permits fell 20.8% to the lowest reading since January 2015. They also slipped across the entire country.
On Monday, the National Association of Home Builders’ (NAHB) housing market index jumped to 37 in May, up from a reading of 30 in the previous month. Anything below 50 indicates a contraction. To put into context, the NAHB’s index ranged between 64 and 76 over the last 12 months.
Mortgage applications for the week ending May 15 will be released on Wednesday, as well as the 30-year mortgage rate.
Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin testified before the Senate Banking Committee. Mnuchin revealed that the Treasury and the central bank are “fully prepared to take losses in certain scenarios” on the capital remaining in the multi-trillion-dollar CARES Act. They also confirmed that at the end of the month, the funds would be distributed from the business lending program and the municipal loan initiative.
They stressed the importance of assessing economic data from states that are reopening will be imperative in determining the next federal response. The next course of action might be to retool the Paycheck Protection Program, according to Mnuchin. It all depends on the data.
Powell told senators:
We’re going to see here fairly quickly how the opening goes. It’s very hard to know. We’re going to be getting a lot of information fairly quickly in terms of what might be needed.
In the end, Mnuchin alluded to the “unprecedented challenges the American people are experiencing due to the Covid-19 pandemic.” He explained that the outbreak had impacted families and communities across the country “through no fault of their own.”
The benchmark 10-year Treasury note has been in the red all day, dipping 0.028% to 0.714%. The 30-year bond has also tumbled 0.021% to 1.435%.
The US Dollar Index, which measures the greenback against a basket of currencies, dropped 0.32% to 99.34, from an opening of 99.62. The buck has been strengthening over the last several weeks, but it has taken a bit of a breather in recent sessions. Year-to-date, the dollar is up more than 3%.
The USD/CAD currency pair shed 0.47% to 1.3870, from an opening of 1.3939, at 18:33 GMT on Tuesday. The EUR/USD rose 0.35% to 1.0953, from an opening of 1.0916.