Technical Analysis

US dollar strengthens, then gives it back after a round of generally-solid economic data

The US released 5 data points at the same time and the initial reaction was modest US dollar strength but that’s since reversed. Bond and equity markets are largely unchanged.

Whenever there’s a large chunk of data, there’s always good and bad. The GDP numbers are the main release and growth was a bit better than consensus, though much of that was government spending and inventory building. The inflation numbers in the GDP report come ahead of tomorrow’s PCE data and indicates it might be soft so I think that’s some of the secondary USD selling. The advance trade report was also soft.

On the plus side, US initial jobless claims were at the lowest since April and there’s no sign of problematic layoffs outside of the bloated tech sector. That highlights the risks of a persistently-tight labor market that could boomerang into second-round inflation effects and force the Fed to keep rates high longer than the market would like. That’s a plus for the US dollar but right now the inflation side is more in focus.

EURUSD 10 mins

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