Healthy US economic data could support the dollar and markets

A new set of US economic data has dispelled worries after yesterday’s new home sales figures.

Preliminary estimates showed that orders for durable goods, instead of the expected 0.5% decline, rose by 1.9% in June after rising by 0.8% a month earlier. This signals that businesses in the USA are not preparing for a recession but continue to increase investment.

At the same time, the goods trade deficit has fallen for the third month to $98.2bn compared to $104 a month before and to a record $125.7bn in March. The improvement comes from both directions: Exports are rising, and imports are falling. Reducing the trade deficit is good for the GDP as it makes a smaller negative contribution. Such data improves expectations from tomorrow’s Q2 GDP estimation.

Furthermore, such data should support both stock indices and the dollar. The news about the economy’s strength and business confidence in the stock market is buoyant. Additionally, of the 145 companies from the S&P500 reported, 70% outperformed expectations.

For the dollar, today’s news is positive in that it supports the hawks in the FOMC, giving more room to raise rates and avoid an imminent rate cut in a year, as the markets now expect.

The FxPro Analyst Team