Rate Update June 30, 2008
The weak stock market may continue to help mortgage rates move lower. However, a weakening dollar may raise inflationary concerns.
The European Union reported the highest year-over-year inflation reading in 16 years this morning. How can European Inflation impact mortgage rates in the US?
In order to combat inflation the EU will have to begin raising short-term rates beginning this Thursday. As the EU raises short-term rates it will reduce demand for the US Dollar because investors will be able to earn higher returns with the Euro. The weakening dollar will continue to push oil prices and other commodity prices higher which could exacerbate inflation concerns in the US.
Looking ahead this week we have the June jobs report set to be released on Thursday. With the 4th of July holiday on Friday we may see increased volatility because of fewer traders working in the markets.