USD Showing Hawkish Signs Again on Weak Risk Sentiment
The risk sentiment has been soft today which is benefiting the USD, as fears of a global recession increase
Today, the tone in financial markets has been soft as economic data globally has been generally weak, except for the US data which was sort of mixed. The April data on retail sales in the US showed positive results with a 0.4% increase, although it missed expectations of 0.8%. But March figures were revised higher as well. That was followed by robust industrial production figures. Additionally, there has been a rise in homebuilder sentiment, which has contributed to a significant increase in the value of the US dollar across various currency pairs.
The rise in homebuilder sentiment is noteworthy, especially considering that Home Depot shares experienced a decline of 2.1% today after reporting lower-than-expected revenue for the first quarter. However, the market sentiment suggests that the positive sentiment number is viewed as a leading indicator. Home buyers, especially those with long-term mortgages, will resume spending on home renovations. This optimism stems from the expectation that people will invest in improving their homes, given the prolonged nature of their mortgage commitments.
Overall, the strong economic data in the United States, particularly in the housing sector, has influenced market sentiment and contributed to the upward movement of the US dollar in various currency markets. The data from Europe was soft on the other hand, with the UK unemployment rate ticking higher to 3.9% while the German ZEW Economic Sentiment turned negative, indicating that the economy is having difficulties. As a result, EUR/USD and other risk assets have turned bearish today.
US April 2023 Industrial Production Report
- April industrial production +0.5% vs 0.0% expected
- Prior was +0.4%
Details:
- Mining output +1.0% vs -0.5% prior
- Manufacturing output % vs -0.5% exp
- Capacity utilization 79.7% vs 79.7% exp
- Motor vehicle assembly rate m units 11.40 vs 10.03m prior
- Industrial output ex autos and parts +0.4% vs +0.5% prior
In April, industrial production in the US saw a 0.5% increase, following two months of stagnant growth. This improvement was largely driven by a significant 1.0% increase in manufacturing, particularly due to a surge in the production of motor vehicles and parts. Even without considering motor vehicles and parts, factory output still rose by 0.4%. Mining also contributed to this growth, with its index increasing by 0.6%. However, the utilities index dropped by 3.1% due to reduced demand for heating, a result of milder temperatures in April. Despite the fluctuations in these sectors, total industrial production was still 0.2% higher than it was a year earlier, standing at 103.0% of its 2017 average.
EUR/USD Live Chart
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