Weak US Data dents USD rise

EURUSD, Daily            

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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Andria Pichidi

Market Analyst


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