USD and Bonds Yields Higher After Mixed US Retail Sales, Employment Figures
The USD has been making gains for more than a month, as the FED sounded less dovish, leaving the possibility open for more rate hikes. Although markets are not expecting more hikes, but they fear the FED will keep interest rates elevated for longer.
The most recent economic data didn’t strongly support investing in the US dollar. Yesterday the manufacturing and services PMI numbers showed a further slowdown in both sectors, while today the numbers for durable goods orders were weaker, but initial jobless claims were better than expected. But, the USD ended up higher and is looking bullish once again, although core orders did increase.
However, the recent bullish momentum in the value of the USD is also following the movement of funds into US treasuries which have resumed the climb again today. This might be influenced, in part, by increased investor willingness to take on risk after NVDA’s impressive financial quarter. Throughout this month, we’ve observed a trend of selling bonds around this time, so the return of this trend isn’t unexpected. While the yields on bonds have only slightly rebounded from yesterday’s decrease in longer-term bonds, the dollar has recovered completely from its decline on the same day.
US July 2023 Durable Goods Orders Report
- July durable goods orders -5.2% vs -4.0% expected
- June durable goods orders was +4.6%
- Non-defense capital goods orders ex-air +0.1% vs +0.1% expected
- Prior non-defense capital goods orders ex-air +0.1% (revised to -0.4%)
- Core orders ex. transport +0.5% vs 0.2% expected
- Ex. defense orders -5.4% vs +6.0% prior
In the last two months, we have seen some volatile numbers from durable goods orders for transportation, and as expected, this has caused some fluctuations in this report. These types of orders often have this effect. The core orders at the heart of this report were as anticipated for this month, but it’s worth noting that the capital goods orders reading for June has been revised downwards.
All in all, this report indicates a weaker trend due to the ongoing manufacturing recession. The automobile sector might face difficulties in the coming months, potentially leading to challenges throughout 2024, especially with interest rates remaining high. Additionally, there’s an anticipated strike by the UAW (United Automobile Workers) in September, which could significantly impact economic data if it continues for an extended period. Nonethless, the USD is higher, hitting the take profit target for our sell EUR/USD signal, while we’re looking to open more signals long on the USD.
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