22 June 2022
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US home sales decline in May

By Edward Bell

  • Sales of existing homes in the US fell by 3.4% m/m in May, their fourth month in a row of declines. Total sales of 5.41m were their lowest level in the past two years as purchases start to feel the bite of higher rates while affordability remains an issue. Signs of weakness in the housing market will be among the first indicators of a broader slowdown in the US economy precipitated by higher interest rates. Other signs of soft activity in the US came from the Chicago Fed National Activity Index which fell to 0.01 in May from 0.4 in April. Any level below 0 indicators “below trend” growth.
  • Canada’s retail sales in April surprised on the upside, rising by 0.9% m/m, moderately stronger than expected. Car sales remained weak as did buying at home improvement stores, suggesting that higher rates are affecting the nature of consumer activity in Canada, a trend that is likely to be replicated globally. Petrol purchases rose by 3% while general purchasing rose by more than 4%
  • Saudi Arabia and Egypt will sign USD 7.7bn worth of bilateral investment deals covering renewable energy, pharma and e-commerce according to local press reports. The announcement comes on the occasion of the visit to Egypt by Saudi crown prince Mohammed bin Salman where he was hosted by Egyptian president Abdel Fattah el Sisi.
  • Bank al Maghrib, Morocco’s central bank, kept rates on hold at 1.5% at their policy meeting overnight. The bank has kept rates on hold since easing them during the pandemic in 2020. Inflation in Morocco is running at elevated levels—hitting 5.9% y/y in April—but the central bank expects it to pass through by 2023. The bank expects growth of 1% this year and inflation of 5.3%.

Today’s Economic Data and Events

  • 10:00 UK CPI y/y May: forecast 9.1%
  • 12:00 SA CPI y/y May: forecast 6.1%
  • 16:30 CA CPI y/y May: forecast 7.3%
  • 18:00 EC Consumer confidence June: forecast -20.5

Fixed Income

  • US Treasury markets were generally weaker overnight even with few direct catalysts to affect the market. Yields on the 2yr UST added almost 2bps to 3.1963% while the 10yr yield was up 5bps at 3.2749%. European bond markets were more mixed however as a risk-on tone seemed to take hold. Yields on the 2yr end of the Germany curve were flat at 1.134% while the 10yr bund yield rose by 2bps to 1.768%.
  • Richmond Fed president Thomas Barkin said the Fed should hike “as fast as you can without breaking anything,” seeming to reinforce the view for another 75bps hike at the July FOMC. Barkin isn’t a voter on policy this year.


  • Currency markets pushed moderately risk-on to the detriment of the US dollar. EURUSD added 0.2% to 1.0544 while GBPUSD gained roughly the same amount to close at 1.2277. USDJPY swung higher, however, rising by 1% to 136.57.
  • In commodity currencies USDCAD was the standout with a drop of 0.45% to 1.2922 in favour of the loonie. CAD remains well off its recent strength closer to 1.25. AUDUSD added 0.3% to 0.6971 while waning consumer confidence appears to be weighing on NZDUSD which tilted negative overnight and is down more than 0.6% today to 0.6292.


  • US equity markets enjoyed a bear rally yesterday as they returned from a three-day weekend and last week’s sell-off, although the commentary from key players remained highly negative and there was no fundamental improvement in the outlook. The Dow Jones gained 2.2% while both the NASDAQ and the S&P 500 closed up 2.5%.
  • Gains were more modest in Europe where markets had also pared some of their losses from last week on Monday. The DAX gained 0.2%, the FTSE 100 0.4% and the CAC 0.8%. All of these US and European indices remain sharply lower since the start of the year, however, save for the UK’s benchmark FTSE index which is down by a comparatively slight -3.2% ytd.
  • Locally, the Tadawul added 2.6%, the ADX 1.2% and the DFM 1.7%.


  • Oil prices managed to post a modest rally overnight but that has since been reversed entirely in early trade today. Brent futures are down by 2% to USD 112.39/b while WTI is off by more than 3% to USD 107.27/b. Anxiety ahead of the testimony of Fed chair Jerome Powell to the US Congress will weigh on the demand side with much tighter policy to dampen consumer behaviour in coming months and quarters.

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Written By

Edward Bell Head of Market Economics

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