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Dovish Central Banks

Overview: Dovish comments from global central banks were positive for mortgage rates this week. This was partially offset by stronger than expected economic data and the news on trade negotiations, but mortgage rates still ended at the lowest levels in more than two years.


Monday, the European Central Bank (ECB) unexpectedly indicated that it could roll out additional stimulus measures as soon as next month, which caused global bond yields to decline. This set the stage for the U.S. Federal Reserve to similarly shift to a more dovish (in favor of looser monetary policy) stance at its meeting on Wednesday. As expected by most investors, the Fed made no change in rates, but it did suggest that it was open to a rate cut if deemed appropriate based on future economic conditions. Nearly half of Fed officials predict that a rate cut will be needed before the end of this year.

The recently released major economic data was a little stronger than expected overall. In May, housing starts held roughly steady from April, near the best levels seen over the past 10 years. Consumer spending accounts for over two-thirds of all economic activity in the U.S., and retail sales posted a third straight month of solid gains in May.

The most significant development this week concerning trade negotiations was an update on negotiations with China. Monday, President Trump said that he and Chinese President Xi Jinping will be having "an extended meeting" next week at the G-20 summit beginning June 28.

Week Ahead

Looking ahead, the Existing Home Sales report will be released on Friday, followed by the New Home Sales report on Tuesday, June 25. The Durable Goods report, an important indicator of economic activity, will come out on June 26. The core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will be released on June 28. In addition, news about the trade negotiations could influence mortgage rates.

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