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Greenback Extends Gains on Strong Durable Goods Data

Stephen Casey September 27, 2017

Durable goods orders in the United States increased 1.7% in August over the previous month. This morning’s result is better than the expected 1.1% bounce after a steep 6.8% decline in July.

The greenback, which has been enjoying a bout of buying support, continued to gain ground in the minutes following the release. Up next on today’s docket is August pending home sales, looking to snap a recent bad run for American housing data.

This week, we have seen what could be viewed as a return of the Trump trade in the early days of 2017. Despite another health care overhaul failure, traders have plowed into the greenback for consecutive days ahead of today’s tax reform announcement in Indiana.

President Trump is expected to announce plans to lower and simplify taxes for everyone from corporations to lower and middle class families. Global yields and the dollar have all been boosted in anticipation of today’s events.

Still to come on Wednesday are comments from the Fed’s Kashkari, Bullard and Rosengren – speaking at various economic forums. Speaking Tuesday, Fed Chair Janet Yellen admitted the committee may have overstated the strength of the labor market and inflation rate.

“My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation,” Yellen said.

Despite these dovish remarks, the US dollar has charged ahead, having one of its best weeks in a long time.

Bottom Line: For the moment, the good times continue to roll for the US dollar. Boosted by a strong rebound in capital goods orders (+0.9% in August, +1.1% revision in July), the durable goods report has kept the wind at the dollar’s sails as North American trade kicks off this morning. There is no letting up today though, and all eyes will be on President Trump’s 3:20pm ET tax announcement. Important labor and growth figures are yet to be released this week, amid a continuing run of Fed-speak.