Core durable goods orders fell by 0.2% in March, worse than a rise of 0.2% expected. And, this came on top of a downwards revision for last month’s number. Taking one step back, the last time that core orders enjoyed a rise was back in September.
The USD retreated, but then the markets probably remembered there isn’t something better to buy.
The extremely weak core orders number reflects a lack of investment and a very worrying slowdown. The numbers also feed into the highly anticipated first release of GDP for Q1 due next week.
With so many poor figures for the US economy in Q1 (eventually reaching jobs), and this includes both the cold winter months and March, another Q1 contraction cannot be ruled out. The world’s no. 1 economy contracted sharply in Q1 2014 but bounced back nicely in Q2 and saw even stronger growth in Q3.
Forecasts stand on an annualized growth rate of 1.1% but GDP tends to surprise and we could see another contraction. A bounce in Q2 is not guaranteed. Some already suspect that the US has entered an outright recession – two consecutive quarters of negative growth.
On the same Wednesday, the Fed releases its decision. If everything looks terrible, we could get a hint that the initial rate will not necessarily happen in 2015. Such a move would be a game changer for the dollar: tightening in 2016 means that the greenback is not more attractive than its peers. Also the ECB’s QE program is set to end in 2016.
The headline durable goods orders numbers came out better than expected at a rise of 4%. This includes volatile items and the markets focused on the core figure, selling off the dollar.
However, this didn’t last: the greenback staged a recovery, and not only against the euro which is affected by Greece.
No, we are not seeing the levels that we had before the terrible new home sales number, but we are certainly seeing a lot of faith in the USD.
Can this last beyond next Wednesday?
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