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Analyzing Global Inflation Releases, Possible Impact on Central Banks

PART:
1 2 3 4
Part 2
Analyzing Global Inflation Releases, Possible Impact on Central Banks PART 2 OF 4

Understanding the Implications of Strong Housing Data

Strong housing data

The U.S. Census Bureau published the July housing data on August 16, 2016. The release was well above market forecasts. Looking at the release, housing starts rose by 2.1% to 1,211,000. The major increase was in the rate for buildings with five or more units. Buildings under construction were the major talking point. They rose to the highest level since the beginning of 2008. They rose to 1,037,000.

Understanding the Implications of Strong Housing Data

Understanding the Implications of Strong Housing Data

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Building permits and housing completions were mostly in line with expectations at 1,152,000 and 1,026,000, respectively. The rise in buildings under construction can be partially attributed to the drop in housing completions.

US Dollar Index posted slight gains

The US Dollar Index measures the strength of the US dollar against the other major currencies. It rose by 0.18% to 94.97 on August 16. The US Dollar Index is expected to stay range bound for the rest of the week with no major data release from the US side. In the absence of major US data releases, investors need to focus on the global macro releases from the other major countries for cues on the direction of the US Dollar Index. Read Is the Hectic Macro Calendar Pointing to a Volatile Week Ahead? for more details on the major data release this week.

Impact on the market

Housing-related ETFs fell despite the strong housing data release. The SPDR S&P Homebuilders ETF (XHB) traded lower by 0.83%. The iShares US Home Construction ETF (ITB) also posted losses—it fell by 0.45% on August 16, 2016.

Housing-related stocks also rose. Lennar (LEN) was trading on a negative bias—it fell by 0.40%. Toll Brothers (TOL) also posted losses with a fall of 0.35% on August 16, while D.R. Horton (DHI) fell by 0.32%.

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