Intraday Market Thoughts

US data drags USD , Aussie capex next

by Adam Button
Nov 26, 2014 23:00

US durable goods orders have been flat since March and that was one of the reasons the US dollar was the laggard on Wednesday. The kiwi and pound sterling where the top performers. Australian capex is due later as the US bows out of the week for holidays.  Today's 2 Premium Trades are driven by a developing Head-&-shoulder formation in the 10 and 2-year yield spreads between two particular nations. this is leading us to issue 2 new shorts as highlighted by the 3 charts in today's Premium Insights.

Thanksgiving meant several US data points were squeezed in Wednesday. The most notable was durable goods orders; excluding air and defense, orders fell 1.3% compared to a 1.0% rise expected. The average over the past seven months has been close to flat – something that's at odds with the US recovery narrative.

In the PCE report, income and spending were both a touch soft while core PCE rose 1.6% y/y compared to 1.5% expected in a tentative sign of inflation. Initial jobless claims were high at 313K vs the 288K consensus.

It's also growing increasingly clear that the hyper-strong Philly Fed last week was an outlier. The Chicago PMI fell to 60.8 from 66.2, about 3 points below estimates in a sign of solid but not strong manufacturing. Homes sales data and the final U Mich consumer sentiment survey were also soft.

The numbers sparked a roughly 30 pip decline in the US dollar across the board, which is a surprisingly sturdy performance for the buck despite some worrisome numbers. The euro in particular took advantage and rallied up to 1.2534 in the third day of gains after the slump on Draghi's comments Friday. EUR/USD eventually stalled at the downtrend from Oct 15.

The main event in the day ahead is the OPEC decision, which will leak out around 1400 GMT. All signs are pointing to no change in quotas and that will threaten the Nov low of $73.25 in WTI.

Before that, Australian private capex data for Q3 is due. Spending has generally been in decline since mid-2012 and it's no surprise that the Aussie peaked about a year earlier. For Q3, spending is expected down 1.9%. The data is due at 0030 GMT.

Another data point to watch is the net currency sales report from the RBNZ. That will likely confirm intervention over the past few months in NZD

Act Exp Prev GMT
Durable Goods Orders (OCT)
0.4% -0.6% -0.9% Nov 26 13:30
Durable Goods Orders ex Transportation (OCT)
-0.9% 0.5% 0.2% Nov 26 13:30
Continuing Jobless Claims (NOV 14)
2.316M 2.350M 2.333M Nov 26 13:30
Initial Jobless Claims (NOV 21)
313K 288K 292K Nov 26 13:30

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