The US Dollar seemed to march to the beat of its own drum today, as a sharp rally defied weaker fundamentals and left it stronger against its major counterparts. Below-consensus results in key economic releases were not enough to slow a run on stops across USD-denominated pairs, with the EURUSD dropping 90 points off of intraday highs to $1.3122 at time of writing. A pronounced rally in US Bond Yields was also enough to fuel dollar demand in the USDJPY, which broke to fresh two-month highs at 118.92 through the afternoon.
Fundamental data through the morning hours was broadly worse than expected, with a large drop in Ex. Transport Durable Goods orders leading the US-bearish news. Officials reported that headline Durable Goods Orders grew at 1.9 percent through November, but the more significant Ex. Transport figure actually declined for the second consecutive month. Given that this is the first consecutive drop since 2002, economists feel that risks likely remain to the downside for the domestic Durable Goods sector.
Not to be outdone, Personal Spending and Income data was also below consensus, with slower income growth leading to a smaller than expected gain in the spending measure. Octobers Personal Income growth was revised lower to 0.3 percent (from 0.4), while the current months change stayed the same at 0.3 Month-on-Month. On a more positive note, November was the first month since June that consumption growth exceeded that of incomes?implying that consumer demand had improved through the period. Excess demand was met with relatively mild inflation, however, as Core PCE printed slightly softer at 2.2 percent on the month.
As the final piece of significant economic data before the holiday weekend, U Michigan Consumer Confidence was revised higher for the month of December?leaving it closer to Octobers 15-month high.
US equity markets were not quite as complacent with the days economic data, as the three major indices fell on relatively illiquid trading. At time of writing, the Dow Jones Industrial Average had fallen 0.5 percent to 12361.80, the S&P 500 shed 0.4 percent to 1412.18, while the tech-heavy NASDAQ Composite index lost 0.5 percent to 2404.67. Many market makers attributed declines to closing out year-end profits, however, and not a bearish turn on the broader business outlook.
Perhaps the more shocking price action through the day was seen in US Fixed Income, with heavy selling leaving Treasury yields at fresh monthly highs. The US 10-Year Treasury Note lost a whopping 18/32 points to leave yields 7 basis points higher to 4.616 percent.
