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Market Wire
Durable Goods Orders Boost Dollar

Stephen Casey October 25, 2017

The U.S. dollar is enjoying a bit of buying support following the release of September durable goods order data, showing a 2.20 percent increase in September over the previous month. Orders for consumer items meant to last three years or more have now increased three of the last four months, continuing a solid run for key U.S. economic data points. Below-the-headline details in the release were also positive, with orders excluding defense and transportation purchases blasting through expectations.

The dollar index jumped almost 10 basis points immediately following the release, further boosting the greenback. U.S. equity futures are flat ahead of the open, despite some better-than-expected European figures. Third-quarter UK GDP was reported at 0.4 percent, a little faster than expected, while Germany’s Ifo survey showed business confidence continuing to rise this month.

The big dollar has been riding a rollercoaster this week as hawkish rumors swirl around who will be appointed as the next chair of the Federal Reserve. Republican senators appear to favor Stanford University’s John Taylor – someone who is expected to speed up the current pace of rate increases. Adding complexity to the picture, it was announced on Tuesday that the Trump Administration will release its long-awaited tax plan on November 1st.

Traders are also digesting corporate earnings and a number of key data points, while positioning ahead of several important central bank meetings. Later this morning, the Bank of Canada concludes its latest policy meeting, and the European Central Bank will take center stage in about twenty-four hours. The Canadian central bank is expected to maintain current policy, and the market expects its European equivalent to reduce its monthly asset purchases from €60 billion to €40 billion beginning in January.

Bottom Line: This morning’s durable goods numbers shouldn’t move the needle in the short-term as markets continue to juggle a number of important storylines – but they do continue to support the argument that the U.S. economy is on the upswing. The big dollar looks set to enter a consolidative phase through the latter half of the week as traders weigh important decisions by the Bank of Canada and European Central Bank, while monitoring D.C. for decisions on the Fed and tax reform.

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