After the positive retail sales data from the US last week, markets were waiting to see the services and manufacturing yesterday, as well as the pending home sales and durable goods orders today, which would show the position of the US consumer.  Services posted a dive yesterday which sent the USD lower for a while, but the US dollar climbed back up.

It has now erased most of yesterday’s rout that came on weak PMI data as traders got no direction from this week’s data. Tomorrow we’ll have the second GDP reading for Q2 which is expected to show a slight improvement but the economy is expected to remain in recession. So the uncertainty still remains.

The forex market is looking at bonds. The reaction yesterday in fixed income to the PMI wasn’t nearly as dramatic as FX and now rates are pushing above yesterday’s levels. The US 2-year yields are up 2.1 bps and a close here would be the highest since June 14 during the CPI-scare.

Today’s durable goods orders report showed an economy that’s stable. Non-defense capital goods orders excluding aircraft rose 0.4%, slightly better than 0.3% expected. The prior was also revised higher. Many market participants are looking for a hawkish speech from Fed chairman Jerome Powell on Friday and that could be what we’re seeing in both FX and rates.

• US July durable goods orders 0.0% vs +0.6% expected
• June orders were+1.9%
• Nondefense capital goods orders ex-air +0.4% vs. +0.3% expected. Prior revised to +0.9% vs +0.5%
• Ex defense +1.2% vs +0.5%prior
• Ex transportation +0.3% vs. +0.2% expected. Prior +0.3%
• Unfilled orders +0.7% vs +0.7% prior — up 23 consecutive months
• Shipments +0.4% vs +0.3% prior

Unfilled orders now sit at $1.126 trillion and have risen for 23 consecutive months but are still well-below pre-pandemic levels. In any case, that backlog should keep factories busy for some time.

US July 2022 Pending Home Sales from the National Association of Realtors

• US July pending home sales -1.0% vs -4.0% expected
• Prior was -8.6% (revised to -8.9%)
• Index 89.9 vs 91.0 prior
• Down 19.9% YoY
• Prices -0.77% MoM

These are contract signings to buy homes. The National Association of Realtors forecasts home sales volumes down 13% this year. In July, US mortgage rates slid, and that helped to stabilize demand.