Tough to Catch a Ride on the USD-Train
The largest and longest FX moves are the ones where everyone is looking to buy a dip that never comes, is that's what's a happening with the US dollar? CAD and AUD were the only currencies to outperform the dollar Tuesday while the Swiss franc lagged. The Asia-Pac calendar is light.
The US dollar has looked like it might dip this week after a six-week rally but more strong data added fuel to the fire.
The main release on the day was durable goods orders and it was the best-ever report with a 22.6% m/m rise but that was heavily skewed by aircraft deals, as we pointed out yesterday. The market was looking at the core component and it fell 0.5% compared to +0.2% expected. But that doesn't tell the whole story, the numbers were actually a bit better than expected when you factor in that the prior was revised to +5.4% from +3.3%.
Clearer readings were from the Richmond Fed and consumer confidence. Both beat expectations and rose to long-term highs.
The US dollar was hesitant to climb at first but eventually gained traction, sending EUR/USD to a fresh low since Sept at 1.3165. Cable is also threatening the weekly low at and trading at 1.6541.
The past 8 trading days have featured one strong US indicator after another and there's an inevitable feeling that Yellen will cave and adopt a more hawkish stance. With so many indicators making highs and the S&P 500 closing above 2000, it's hard to justify ZIRP and QE.
Another currency that could benefit from a pickup in the US is the Canadian dollar. Poloz reiterated a neutral and patient stance on the weekend but if the Fed moves, the BOC won't be far behind. Ashraf talks more about the loonie in his latest comments.
|Durable Goods Orders ex Transportation (JUL)|
|-0.8%||0.5%||3.0%||Aug 26 12:30|
|Durable Goods Orders (JUL)|
|22.6%||7.5%||2.7%||Aug 26 12:30|
|CB Consumer Confidence (AUG)|
|92.4||89.0||90.3||Aug 26 14:00|
|Richmond Manufacturing Index|
|12||8||7||Aug 26 14:00|
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