US housing starts rise in May, but homebuilder sentiment drops in June due to the higher lumber costs; ECB’s Draghi seeks patience with rate hikes
On Tuesday, investors were mainly looking at the readings coming from the United States due to the lack of important macro-economic events, where the US home building rose in the previous month coming at 1.35 million, as opposed to the expected 1.31 million. However, the sentiment among the home builders have fallen in June to the lowest rate this year as a consequence of high lumber costs. According to the National Association of Home Builders, the tariffs on lumber and imported materials and increasing the price of the home construction and limits the affordability for potential buyers. The purchase is made less attractive due to the higher mortgage rates and rising property values, especially for people entering the property market for the first time.
Another important event that was monitored yesterday is the speech of ECB President, Mario Draghi. During his speech, he has stated that the European Central Bank will be patient with the tightening of the monetary policy and the aim is to move gradually with the rate hike. He has also mentioned the rise of uncertainty because of the global trade war threat is emerging, and a rise in inflation is still uncertain because higher wages may not translate into faster price growth. While the prices are currently on the rise, affected by the higher oil prices and the ECB sees inflation near the 2% target in 2020, President Draghi stated that the uncertainty still prevails and is influencing the clarity of the price growth outlook.
Furthermore, according to Reuters, ECBs; policymaker, Jan Smets, sees escalating global trade tensions as a downward risk for the world economy. While in the Eurozone the risk for growth is considered balance, in the global environment the risks are on the downward side and are causing worries. He has also added that even though the ECB said last week that the interest rates would not be risen for at least one year, it is still too early to state when exactly they would be lifted.
ECONOMIC CALENDAR EVENTS FOR JUNE 20th
EUR German 30-y Bond Auction
EUR ECB President Draghi Speaks
JPY BOJ Gov Kuroda Speaks
AUD RBA Gov Lowe Speaks
USD Fed Chair Powell Speaks
USD Current Account
USD Existing Home Sales
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