Dollar Standard – for decades the dollar has been the world’s dependable financial standard with nearly 90% of all foreign exchange transactions making it the world’s ‘reserve currency’. When Tariffs were announced last month, a phenomenon happened where the stock market crashed, and money did not go into US Treasury bonds, causing many economists to theorize that the worlds perception of US Treasury bonds (and consequently our dollar) is shrinking. At the peak the dollar made up 73% of the world’s central bank reserves, now it is down to 58%. Another currency, however, is not really poised to take the mantle yet. When you add all the other currencies together, there is a lot of non-dollar reserves, but individually they don’t really amount to much. To be a stable reserve a currency needs a massive financial market. Even the Euro is a bit unreliable because each individual country has their own government with unbalanced financial security. China is attempting to become a bigger player, but RMB reserves only make up 2.2% as investors still worry about government rules. Gold is too small and too illiquid of a market and Bit Coin is way too volatile. While the dollar wanes a bit it still seems to be the best option.
Mortgage Rates – the price of Mortgaged Backed Securities responded negatively to the announcement of a UK trade deal that caused a minor stock rally. Rates increased slightly this week and are down 0.25% from this time last year.
Home Prices – Cotality (Formerly CoreLogic) reported that home prices rose 0.6% in March and are up 2.5% year over year. This is a decline from the previous report of 2.9%. Cotality is forecasting nearly a 5% gain over the next 12 months, a big bump from last months’ forecast of 4.2%.
Fed – the Fed completed their 2-day meeting and lefts the Fed Funds Rate unchanged. Fed Chair Powell used the term ‘waiting’ 22 times in his comments. Meanwhile the UK cut their rate by 0.25% this week with a narrow vote of 5-4, which is in interesting contrast to the US where it is rare to see a dissenter from the chairperson.
China Tariffs – Treasury Secretary Scott Bessent and Chinese Vice Premier He Li Feng are meeting in Switzerland this weekend which marks the first confirmed trade talks since the US imposed 145% tariffs on China. The goal is to deescalate the trade standoff that has essentially haulted trading between the world’s 2 largest economies.
Mortgage Applications to purchase homes rose 11% and are up 13% year over year. Refinances also rose 11% and are up 51% year over year.