Softer US data outcomes, underpinned by the overnight ISM reading, has taken the Citi US EASI off its recent highs. The chart below overlays the EASI against the Goldman Sachs financial conditions index for the US. Tighter US financial conditions, which is presented as a 6 month rate of change on the chart, suggests the balance of risks rests with further downside in US data outcomes relative to expectations.
- More data prints are out tonight with factory orders and durable goods data due. The main focus is likely to be on Friday's jobs print though. To date, fresh softness in US data outcomes has been more in survey outcomes rather than hard data.
Fig 1: Citi US EASI Versus Goldman Sachs US FCI
Source: Citi/Goldman Sachs/MNI - Market News/Bloomberg
- The second chart overlays the Citi EASI against the Atlanta Fed GDP nowcaster. A weaker period of data momentum should hurt growth expectations, although the EASI is coming off fairly elevated levels.
- If such a scenario does unfold it could weigh further on USD momentum. Arguably lower yielding/safe havens would benefit more thank higher beta plays in the FX space, as fresh downside in US data momentum could heighten global growth fears.
- The DXY is already close to 2.8% off its recent highs though. This is not too far off average peak to trough moves in 2022 amidst what has been a broad USD uptrend. Other factors have also been in play in terms of driving USD sentiment (UK fiscal concerns/EU energy woes).
Source: Citi/Atlanta Fed/MNI - Market News/Bloomberg