USD weakens as US mortgage applications surge 30% on lower rates

The US Dollar Index declined 0.2% as mortgage applications jumped 29.7% week-over-week, signaling potential economic shifts ahead of the Federal Reserve's policy decision. The Market Index surged to 386.1 from 297.7, while refinancing activity soared 57.8% as the 30-year mortgage rate dropped to 6.39% from 6.49%. This dramatic increase in mortgage demand suggests improved housing market sentiment and potential consumer confidence recovery. The data reinforces market expectations for a Fed rate cut, with futures pricing in a 65% probability of a 25-basis-point reduction. While mortgage applications rarely move forex markets directly, the sharp improvement adds to the narrative of moderating inflation and economic conditions that could justify easier monetary policy. USD pairs showed weakness across the board, with EUR/USD testing 1.1100 resistance and GBP/USD approaching 1.3200. Traders should monitor upcoming Fed communications for policy guidance.