Durable Goods, not bad

The latest U.S Durable Goods Orders, released yesterday, increased by 0.7% during May, well ahead of estimates at 0.1%. However, at the same time, April’s gain was slightly revised lower (by 0.1%). Take the volatile transportation sector out of the mix, and May’s figure rose by 0.7%, again comfortably beating estimates of 0.4%. The report reflected broad-based improvement in demand across almost all manufacturing industries, bar computers and computer equipment, despite the backdrop of higher interest rates.

More good news from the U.S housing market

Following on from Friday’s surprising jump in New Home Sales, yesterday also saw some more positive news on the housing front, with Pending Home Sales jumping by 0.7% though May, against an expectation there of -3.7%. A slight pullback in mortgage rates may have been the driver to the pop higher. If that was the case, then any gains are likely to be short-lived, given the subsequent increases in rates.

Is good data bad news now then?

Fed Chair, Jerome Powell, admitted last week that the U.S could be headed towards a recession. If there are clear signs that economic data is softening, then there is every chance that future U.S rate hikes from the Fed could be less aggressive, which in turn is a positive for markets. Therefore, the better the data is, the more chance of more hikes, hence markets reacting positively to weaker U.S data, and vice-versa. Markets currently expect an easing from a 75bps to 50bps hike, in the level of hikes come the September FOMC meeting.

Slight dip for the dollar

The greenback started the week off on the defensive, as last week’s broader market positivity (just about) maintained momentum yesterday, with the dollar index (DXY) moving back below 103.50 for the first time in 10 days. This helped to ensure that EUR/USD finally managed to break over the 1.0600 resistance zone, at least for a while, which had been frustrating the bulls and preventing further upside acceleration for a spell. After 8 years of negative interest rates, the mere fact that the ECB are about to hike Euro area rates (in July) is helping to provide support to the single currency. GBP/EUR drifted back to the 1.1600 region after GBP/USD was unable to match EUR/USD’s rally, only managing to reach 1.2330, before drifting lower.

Higher oil = higher Loonie

USD/CAD mirrored the other dollar crosses and continued its consolidation, slipping back below 1.2850. A positive day for oil helped to underpin the Loonie, with both Brent and US Crude back over $110pbl, as OPEC+ are rumoured to be trimming their oil market surplus forecast for this year by 1mio bpd, helping to fuel (sorry) the rally.

U.S consumer less confident?

After Friday’s University of Michigan headline consumer confidence index slipped from 58.4 to 50.0, expectations for todays (June) consumer confidence print from the Conference Board have since diminished somewhat. Consumer confidence features highly on the Fed’s radar, so markets and the greenback will be sensitive to any rogue outcomes.

What else is happening today?

ECB’s Lagarde, Lane, Elderson & Panetta speech

USD – Goods Trade Balance, Wholesale Inventories, Housing Price index, S&P/Case-Shiller Home Price Indices, Consumer Confidence, Richmond Fed.

GBP – BRC Shop price Index

JPY – large Retailer Sales, Retail Trade