The US Economy is Quietly Accelerating

Traders are busy watching the World Cup but signs that the US economy is kicking into a higher class continue to emerge. The Swiss franc was the top performer on Tuesday while commodity currencies lagged on a round of risk aversion. Japanese corporate prices and central bank chatter are highlights later.  

On Tuesday US new home sales surged to a 504K annual pace from 425K, far surpassing expectations. Consumer confidence was similarly strong, rising to 85.2 from 82.2. Consider this:

Today new home sales hit the highest since 2008 Today consumer confidence hit the highest since 2008 Monday the Markit manufacturing PMI hit the highest since 2007 JOLTS are the highest since 2007 Core CPI is at the highest since Feb 2013 The signs of growth and inflation have been cast aside, partly because the Fed appears willing to tolerate higher inflation for a period as employment improves. The Fed's Dudley almost said as much on Tuesday as he indicated employment can fall substantially before inflation becomes a problem.

But from here there is nowhere for the Fed to go expect toward the hawkish side of the scale. As they do the US dollar will climb.

Aside from the current pre-occupation with the World Cup, the stock market made a tough-to-explain turnaround Tuesday. Stocks rallied on the data but late in the day wilted and the S&P 500 closed almost 20 points below the highs. One of the risks is another set of political primaries later today. If the Tea Party continues the momentum after the Cantor defeat, markets could get jittery.

Other risks in the hours ahead are the Japanese corporate service price index at 2350 GMT, the Fed's Williams at 2230 GMT and the RBA's Williams at 0300 GMT.