US Dollar stronger after positive consumer confidence data supported high beta currencies. The euro has fallen against the US dollar to about 1.1350. At the same time, the GBP/USD is flat around 1.3550 as traders digest the most recent economic print. On Tuesday, both currency pairs were unable to catch a bid, with the Euro and Pound suffering under the weight of a stronger Dollar.
In April, the United States saw a 6.3% decline in durable goods orders. This drop was led largely by a steep drop in orders for nonmilitary aircraft. Excluding transportation orders, the data showed just a slight 0.2% gain. A downward revision of the previous month’s flat reading pretty much negated this jump. It was recently updated to reflect a 0.2% decrease. That’s the good news. The recent drop in durable goods orders has people worried. Investment in information processing equipment jumped, notching its largest quarterly growth in 14 years.
Currency Market Reactions
The EUR/USD currency cross is fighting to defend its burgeoning support near the 1.1350 level. This continued fight is a symptom of a disturbing trend in overall market sentiment. The Euro finds it hard to recover. The hawkish backdrop of the strong US Dollar, supported by positive economic data, continues to maintain that pressure.
Back in May, all the economic indicators pointed to a notably positive turn in consumer sentiment. This additional support helped the US Dollar strengthen against its primary US Dollar Index rivals. The continued stability of the Dollar has limited upside potential for both EUR/USD and GBP/USD.
“Even ‘real-time quotes’ can be far behind what is currently happening in the market.” – Wells Fargo Investments, LLC
GBP/USD has struggled and continued to languish. When pressed during the typical American trading session, it traded back beneath 1.3550. Foreign currency traders continue to weigh what the most recent US economic performance means for currency market dynamics.
Durable Goods Orders Decline
April’s durable goods orders report was a rout, down a shocking 6.3%. This decline was due in large part to a drop in orders for commercial planes. This unprecedented downturn brought with it a wave of concern regarding the state of health within manufacturing and business investment across the US economy.
Without transportation, the data showed a slight upward revision of 0.2%. Despite that, a downward revision flipped March’s reading from flat to negative. It has since updated to reflect a 0.2% decrease instead. The positive and negative economic signals speak to the uncertainty that pervades both consumer and business spending with near-term tariffs on the horizon.
Amazingly, even with such a drop in durable goods orders, businesses did continue to exhibit behaviors of pulling forward demand in advance of tariff implementations. That drove a record quarterly increase in spending on information processing equipment, representing a key trend for industry participants that’s still going strong.
“There is a chance that your order may have already been executed, but due to delays at the exchange, not yet reported.” – Wells Fargo Investments, LLC
April’s underlying durable goods orders were just 0.1% below February’s figure. This is a sign of remarkable resilience in the face of continuing economic volatility.
Implications for Investors
Investors are watching how all of these economic developments will affect these domestic and international markets. The dollar’s impressive run is a sign of increased confidence in the US economy’s continuing recovery. This is even more the case as consumer sentiment keeps on getting better.
Even as durable goods orders have dropped, other sectors—including information processing equipment—have shown strong growth. This dichotomy underscores a new economic reality that will require investors’ careful attention.
“Your trade will be executed above, below or at the $50 stop price.” – Wells Fargo Investments, LLC
As traders consider these economic releases, they need to be on the lookout for volatility in the markets and possible changes in relative currency strength. Sentiment as support Consumer sentiment is positive, but durable goods orders are weighing on trading strategy. This dynamic will continue to exert an outsized influence on the process in the near term.