The dollar was smacked lower following the GDP print, which was well shy of consensus forecasts, and the much weaker than expected durable orders outcome. EUR-USD rallied to 1.0708 highs from near 1.0680, as USD-JPY slumped to 114.75 from over 115.10.
U.S. GDP posted a 1.9% rate of growth in Q4, which was below market expectations, and compares to the 3.5% clip in Q3, the 1.4% rate in Q2 and 0.8% in Q1. The brings the 2016 average to 1.9%. Business fixed investment jumped 4.2% from the prior 0.1% gain Q3, with spending on nonresidential structures up 2.4%, while residential spending surged 10.2%. Government spending edged up 1.2% versus 0.8% in Q3. Inventories added $41.6 bln, well up from the $16.6 bln previously. Net exports subtracted a big $77.4 bln from $36.3 bln previously. The chain price index climbed 2.1% from 1.4%, with the core rate slowing to 1.3% versus 1.7%. The mix of data won’t give clear direction to the markets.
U.S. durable goods orders dropped 0.4 % in December, missing expectations for a sizeable bounce, from a revised 4.8% drop in November (was 4.5%). Transportation orders declined 2.2% from -14.7% (revised from -13.6%). Excluding transportation, orders were up 0.5% from 1.0% previously (revised from 0.5%). Nondefense capital goods orders excluding aircraft rose 0.8% from 1.5% (revised from 0.9%), and is a third straight monthly gain. Shipments climbed 1.4% versus 0.3% (revised from 0.1%). Nondefense capital goods shipments excluding aircraft increased 1.0% from 0.6% (revised from 0.2%). Inventories were unchanged from 0.2%. This is another mixed report, but the improvement in the key components should weigh on Treasuries.
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