Overview: Mortgage rates continued their modest yet steady improvement over the past week. The primary cause was a geopolitical event involving North Korea, which was positive for mortgage rates. This was partly offset by stronger than expected economic data. Mortgage rates fell slightly over the past week to the best levels of the year.

On Tuesday, North Korea launched a missile that flew over Japan. This was viewed as an unusually aggressive action. Investors reacted to the elevated geopolitical tensions by shifting from riskier assets, such as stocks, to relatively safer assets, including U.S. mortgage-backed securities (MBS). The added demand for MBS caused mortgage rates to decline.

The second estimate of second quarter gross domestic product (GDP), the broadest measure of economic growth, was released on Wednesday. It revealed an upward revision from 2.6% to 3.0%, which was above the consensus forecast and was the fastest pace since the first quarter of 2015. GDP growth was just 1.2% during the first quarter of 2017. The main components responsible for the upward revisions were consumer spending and business investment. While the stronger growth was good news for the economy, it also raised the outlook for future inflation, which was negative for mortgage rates. Week Ahead

Looking ahead, the core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will be released on Thursday. The important monthly Employment Report will be published on Friday. As usual, this data is the most highly anticipated economic data of the month. The Institute for Supply Management (ISM) Manufacturing Index will also come out on Friday, followed by the ISM Services Index on September 6. There will be a European Central Bank (ECB) meeting on September 7 that could affect U.S. mortgage rates as well. Investors will be looking for information from the ECB about future plans for tapering the bond purchase program.