Daily Market Pulse

Durable Goods or bad?


With recent US data remaining particularly distinctive, the talk of and subsequent market pricing for a higher terminal (or final) rate from the Fed has increased, which resulted in risk assets having their worst-performing week for around two months. Global equity markets found the going particularly tough.  Amongst currencies, the real winner from this backdrop is clearly the dollar, and the dollar index (DXY) has now rallied roughly 5% from the low set at the beginning of February. If estimates of weakness over the past month are proved correct, today’s Durable Goods orders have the potential to give the dollar bears a rare reason to smile. 



Having declined by a further 1.3% throughout the past week, EUR/USD is attempting to find a base. However, the latest batch of regional data has hardly helped the cause for the single currency, with Economic Sentiment, Industrial Confidence, and Services Sentiment all missing estimates, albeit from a higher base. Key inflation will be the one to watch later in the week (Thursday) to see if the recent slower declines are more broadly consistent with regional data.



The UK and EU are widely rumored to be about to agree on a deal on the Northern Ireland protocol later today, with Rishi Sunak claiming that he has been able to negotiate ‘fundamental’ changes to the post-Brexit agreement. Whilst Sunak will still need to face the momentous challenge of getting both Tory MPs and the DUP (Northern Ireland) to agree on his plans, the news may give the pound some support, at least in the headlines. However, the devil will be very much in the details. In the meantime, GBP/USD has slipped around 0.8% over the past week. 



With incoming president Ueda failing to suggest he favors any immediate changes to the BoJ’s YCC policy, USD/JPY has been free to rally on rising US bond yields as the yield differential between the US and Japan expands ever wider. Having rallied nearly 4% over the past two weeks, the pair remains close to a three-month high, and could come under further upside pressure moving forward. 



USD/CAD has rallied over 2% over the past couple of weeks, driven by the stronger greenback, a pausing BoC, and oil prices trending lower. Aside from the US input (see USD), Canadian data this week will be dominated by Q4 GDP growth, which is expected to decline to around 1.5%, which could give the BoC further confirmation of a broadly slowing Canadian economy. 



Recent data confirmed that Mexico’s economy expanded by 3.1% in 2022, which is far higher than many analysts had predicted, and more in line with the government’s own forecasts. USD/MXN just about marked a fresh cycle low (MXN high) last week, which is highly impressive given the stronger greenback elsewhere and has subsequently remained close to that level.


USD/BRL slipped by over 1% last week, highlighting a much stronger performance for EM currencies against the greenback than G20 achieved over this period. 


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