Positive Economic Data Boosts the US Dollar

Group of fund manager analyzing big data for future investment

This morning, several key US economic indicators have come in significantly better than expected. The latest US Q2 GDP update (3.8% vs Street 3.3%), and durable goods orders (2.9% vs Street -0.5%) suggest a more robust economy than previously thought. Meanwhile, fewer than expected weekly initial jobless claims (218K vs previous 232K) suggest US labor market conditions may not be as bad as feared. Finally, a shrinking and smaller than expected US goods trade deficit (-$85.5B vs Street -$95.2B and previous -$103.9B) suggests the US tariff program may be starting to have its desired effect on the balance of trade.

Combined, these indicators suggest reduced pressure on the Fed to aggressively cut interest rates. The US 10-year treasury note yield continues to creep back up toward 4.20% on the news. Meanwhile, the US Dollar is rallying again, sending the Euro, Loonie, Yen and Pound down 0.1%-0.4%. Cryptocurrencies are taking a hit as well with Bitcoin down 1.8% and Ether falling 4.3%. In commodity action, Crude Oil is down 0.6% and Copper is up 0.2%.

Precious metals are holding their ground with Gold gaining 0.3% and Silver soaring 2.0%. Equities, on the other hand, are pulling back again. US index futures are down 0.2%-0.6%, with NASDAQ futures leading the way lower, while in Europe, the DAX is down 1.0% and the FTSE is falling 0.3%. Combined, this action suggests that defensive capital flows may be accelerating.

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