The Eurodollar rallied against the greenback yesterday despite the release of a lower-than-anticipated current account surplus in January.
In the US session, the National Association of Realtors reported the first decline in existing home sales in three months. That triggered a US dollar sell-off, with the EUR/USD surging from a low of 1.1875 to a high of 1.1925 in the last 24 hours.
According to the data published by the European Central Bank, the European Union’s current account surplus declined slightly to €30 billion in January, from €36.70 billion in the earlier month, and missed the economists’ estimates of €34.50 billion for the reported period.
Goods recorded a surplus of €39 billion in January. Likewise, services posted an excess of €12 billion. It was partially negated by a deficit of €17 billion in secondary income and €4 billion in primary revenue.
On a y-o-y basis, the current account posted a surplus of €263 billion (2.3% of euro area GDP) in January, slightly higher than the surplus of €262 billion (2.2% of euro area GDP) posted in January 2020. Specifically, an abundance of goods and services rose to €353 billion (from €330 billion) and €49 billion (from €48 billion), respectively.
The surplus for primary income fell to €17 billion in January, from €40 billion. On the contrary, the deficit for secondary income increased to €157 billion, from €156 billion.
Concerning direct investment, Eurozone residents made net investments of €83 billion in non-eurozone assets in 12 months. Non-residents’ net investments in the Eurozone assets rose to €209 billion in the year ended January.
In portfolio investment, net purchases of overseas debt securities by the Eurozone residents rose to €454 billion in the year ended January 2021. During the same period, Eurozone residents carried out net purchases of overseas equity worth €227 billion. Non-residents carried out net purchases of Eurozone debt securities worth €4 billion in the year ended January.
In other investments, Eurozone residents’ net acquisition of overseas assets declined to €170 billion in the year ended January.
In the US, the National Association of Realtors (NAR) stated that existing home sales were 6.22 million units in February, down from 6.69 million units in the earlier month, and missed the 6.55 million units anticipated by economists. The reported figure was the first decline following two previous months of gains.
Overall, sales increased 9.1% y-o-y from 5.70 million units in February 2020.
Commenting on the data, Lawrence Yun, NAR’s chief, said, “Despite the drop in home sales for February – which I would attribute to historically low inventory – the market is still outperforming pre-pandemic levels.”
He warned of a likely slowdown in growth in the forthcoming months as rising prices and mortgage rates will slash into home availability.
The median existing home price was $313,000 in February, an increase of 15.8% from $270,400 recorded in February, as prices increase in all-region. February’s national price surge reflects 108 consecutive months of y-o-y gains.
Total housing inventory was 1.03 million units in February, matching January’s inventory, but a decrease of 29.5% on a y-o-y basis (1.46 million units).
First-time buyers accounted for 31% of sales in February, a decline from 33% in January and 32% in February.
The weak economic data from both the US and Europe is expected to keep the EUR/USD pair range-bound with a slight bullish bias in the short term.
The historical price chart indicates that the EUR/USD pair has bounced off the support at 1.1875. The next resistance is anticipated only near 1.1990. Additionally, the currency pair is trading above its 50-day moving average, while the stochastics indicator is rising towards the bullish zone. Therefore, we are anticipating the EUR/USD pair to remain in an uptrend in the near term.
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