The US dollar traded within a tight range against the euro on Wednesday following strong gains earlier this week that were stoked by an improved outlook for higher interest rates in the United States. The greenback edged slightly lower against the shared currency today to erase a gain that followed the release of solid existing home sales this afternoon.
A report released by the National Association of Realtors at 14:00 GMT today revealed that existing home sales were stronger than expected in May after a sharp drop in April. Existing home sales rose 1.1% to a seasonally adjusted annual rate of 5.62 million last month following a decline of 2.5% to 5.56 million in the previous month, despite expectations of a 0.5% drop to 5.55 million. On a yearly basis, sales gained 2.7% in May, which marked the third biggest gain in the last 12 months.
Sales of existing homes, which investors view as a key indicator for the strength of the US housing market, improved last month as more buyers entered the market due to healthier labor conditions and lower mortgage rates. Affordable home listings quickly came off the market as demand rose to a robust level in recent months, according to National Association of Realtors chief economist Lawrence Yun.
The median existing home price in May was $252,800, which is 5.8% higher than the median price a year ago. Yun warned that home price gains will prove unsustainable in the long run and will require more homes to be available for sale so the market can remain stable. Total housing inventory was 1.96 million homes in May, which is 8.4% lower than a year ago.
Gains in the housing market have a wide effect on the US economic growth, which is closely tracked by the Federal Reserve to decide its monetary policy. Investors expect that the central bank may increase interest rates before the end of the year following a number of hawkish comments from Federal Reserve officials this week. Anticipation of an interest rate hike in December rose to 43.6% today, according to the CME Group FedWatch tool.
EUR/USD traded at 1.1151 as of 18:05 GMT on Wednesday from 1.1134 when the dayâs trading began. The pair moved in a range between 1.1127 and 1.1152 today.
The Dollar Index, which tracks the performance of the US currency versus other major counterparts, declined to 97.65 as of 18:00 GMT today from 97.76 yesterday.
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