US home prices continued to explode in June: the June S&P CoreLogic home price data series (its 20-city index at least) registered a 19.1% gain year-on-year, a record in the history of the survey going back to 2001, and probably ever, as the gutting of interest rates is reaching maximum impact – also on inequality. Surveys show that US homebuyer sentiment is at rock-bottom and the Biden administration may announce a plan today to support the increase the supply of homes that will be rented at lower prices. Given than home sales activity has rolled over, the housing market could be the source of a net drag on the economy.
Weak US Consumer Confidence – this poll saw a more than 15-point drop – the largest in point terms, ex-pandemic outbreak – since 2011 in the month of a huge market correction. As discussed in this morning’s Saxo Market Call podcast, the University of Michigan survey may be a more leading survey and is more noteworthy recently in that the survey dropped in August to an even worse reading than during the worst months of the pandemic outbreak in the spring of last year.
Germany – SPD polling momentum extends. The momentum for the SPD is stunning in the recent polling, with the SPD now solidly overtaking the CDU/CSU in polling averages and one of the most recent, one even showing 27% in favour of the SPD vs. 19.5% to the CDU/CSU. A center-left government is likely the most EUR-positive outcome after September 26, although the ability to put together a ruling coalition remains a key outstanding question.
US President Biden calls official end to US nation-building. Biden announced this in a speech intended to put a positive spin on the end of the mission to evacuate US citizens and local allies in Kabul, Afghanistan. This makes explicit a trend that was already clearly in place with Obama’s exit from Iraq and Trump’s isolationism. The neo-cons are down for the count and the geopolitical heat potential has risen considerably as “bad actors” may feel emboldened while US allies may ponder the strength of the US backstop of their interests. This could eventually have profound consequences for capital flows and policies towards multinationals – as US platform companies, for example, are already a hot topic. Stay tuned.
Table: FX Board of G10 and CNH trend evolution and strength
The USD and especially the JPY and (making a note to follow up soon) especially sterling struggling here, while pro-cyclical currencies are rallying strongly (NOK and NZD) or trying to dig themselves out of a hole (I’m looking at you, Aussie, where the momentum shift to the positive is noteworthy over the last week.)