New Zealand dollar holds above US$0.59

Key Movers

U.S. homebuilding plunged to a more than three-year low in August as a resurgence in mortgage rates weighed on demand for housing, but a jump in permits suggested new construction remained supported by a dearth of homes on the market. The decline in housing starts reported by the Commerce Department on Tuesday was the largest in a year and occurred across the board. Housing starts tumbled 11.3% to a seasonally adjusted annual rate of 1.283 million units last month, the lowest level since June 2020. Data for July was revised lower to show starts accelerating to a rate of 1.447 million units instead of the previously reported 1.452 million units. Single-family housing starts, which account for the bulk of homebuilding, dropped 4.3% to a rate of 941,000 units last month. Single-family homebuilding dropped in the Northeast and Midwest and slumped 26.9% in the West, which was blamed on Hurricane Hilary. It rose in the densely populated South.

Looking ahead today and all eyes will be on the Federal Reserve interest rate decision.  The Federal Reserve is expected to hold its benchmark lending rate steady this week as it waits for more data to understand how previous rate hikes are affecting the US economy. The central bank raised rates to a 22-year high in July. At the conclusion of its two-day policy meeting on Wednesday, the Fed is also set to release a fresh set of economic projections that will likely reflect stronger economic growth and slightly lower unemployment this year, compared with previous estimates. Officials’ new economic projections will likely show at least one more rate hike this year. There seems to be a consensus among Fed officials that holding rates steady this month is the right move but some have said the Fed could raise rates again after September.