Daily Market Digest: US Durable goods rise less than expected

Posted on
Durable Goods Orders

The British pound continued to edge higher with GBPUSD posting a 10-week high. Meanwhile US durable goods orders increased 0.80% less than what the markets expected

Today’s Economic events

  • US durable goods orders m/m
  • US Core Durable goods orders m/m

Coming up

  • BoC Governor. Poloz Speech
  • S&P HPI
  • Flash services PMI
  • CB consumer confidence

US Durable goods orders rise less than expected

Durable goods orders in the US increased at a pace of 0.80% in March, led by a surge in defense spending, according to data released by the US Commerce Department on Tuesday. The print, however, fell below expectations of a 1.70% increase. Durable goods orders fell 3.10% in February, revised lower from 3.0% previously. Defense orders contributed nearly 48.40%, but demand from businesses and consumers remained weak. Excluding transportation, new orders fell 0.20% missing expectations of a 0.50% increase but showed a slowing of momentum following February 1.0% decline. More economic data is expected later in the day including flash services PMI and the conference board’s consumer confidence.


AUD eyes CPI data tomorrow

The Australian dollar was trading mixed today but found support above $0.7718 ahead of tomorrow’s quarterly CPI data. Forecasts estimate a slower pace of growth in headline inflation at 0.30% in the first quarter of 2016, compared to 0.40% inflation rate in the previous quarter. The trimmed mean CPI is also expected to be soft at 0.50% in the period compared to 0.60% previously. A miss on the CPI estimates could turn AUD very bearish increasing speculation that the RBA could look into cutting rates further at one of its upcoming meetings. The AUD is also likely to be weighed down ahead of the Fed decision tomorrow.

However, analysts at NAB expect that unless CPI disappoints strongly, the case for further RBA rate cuts is unwarranted. But the bank’s forecasts for CPI is lower, noting that “NAB expects headline CPI to be a low +0.1% q/q, 1.6% y/y. Underlying inflation is also expected to be subdued at 0.5-0.6% q/q, 2.0% y/y (in line with the RBA February SoMP track)”


Markets flat ahead of busy Wednesday

Lack of any major economic events during the Asian and European session saw the markets trading flat for the most part ahead of the NY trading session. Overnight, BoJ Governor Kuroda spoke briefly but refrained from making any explicit references to Thursday’s BoJ event. The markets are divided on the outcome of April’s Bank of Japan meeting with expectations calling for further expansion to QE and cutting rates while some expect the BoJ to stand pat on policy, as voiced by some high ranking officials from Japan. With the Fed decision due tomorrow, the markets were seen trading in a range although EURUSD managed to post some gains but reversed close to the $1.130 handle.

The British Pound was the only clear winner as the sterling continued to post steady gains. GBPUSD posted a one-month high, trading near $1.455 at the time of writing.


Institutional Call of the day – GBP/USD, ING*

Analysts at ING say that the GBPUSD upside looks limited at this point. In a note, ING says that the gains in GBPUSD came as investors trimmed their Brexit risk-related short positions as support for the ‘stay’ camp got a boost from President Obama’s weekend comments. The Dutch bank estimates that the GBP risk premium also fell by 3.0% since early April and is now close to zero.

“The recent strong rise leaves GBP exposed should the Brexit news flow hit the markets again ahead of the 23rd June referendum.”

GBPUSD (1.4564) posted a 10-week high and gained 0.50% on the day.

* Institutional Call of the day is not a recommendation or an endorsement by Orbex.com to buy or sell

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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