The Dollar is broadly unchanged today in trade-weighted terms despite the release of much stronger-than-expected US durable goods orders data – a good proxy of domestic investment. Headline durable goods orders rose 2.7% mom in March – the strongest growth rate since August.
However, the Dollar is still up nearly 1% over the past week to its strongest level since early January, which has resulted in major crosses against the Dollar hitting multi-month lows. GBP/USD, which had until recently oscillated in a narrow 1.30-1.33 range, fell below 1.29 today for the first time since mid-February. Similarly, the AUD/USD – which had until Tuesday managed to stay above 0.71 – has since fallen over 1% following the release of weak CPI-inflation data for Q1. The headline figure fell to just 1.3% yoy from 1.8% yoy in Q4 2018, fuelling expectations that the RBA will have to cut its policy rate. The market is now pricing in a chunky 50bps – or two full cuts – over the next 12 months.
The move lower in EUR/USD to 1.114 – its lowest level since mid-June 2017 – has been even more acute, with the Euro weighed down by weak Eurozone growth data. The German Ifo business climate index fell back to 99.2 in April from 99.6 in March, suggesting that GDP growth in the Eurozone’s largest economy remained weak early in Q2.
US macro data have been mixed but they have been outright weak in most other major economies and this has helped the Dollar stay above the fray. UK data have been encouraging (for Q1 at least) but the unresolved issue of Brexit is still acting as a headwind to any meaningful gains in the Sterling trade-weighted index.
