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US Data Momentum Up From Recent Lows ​​

USD

US data momentum is showing some signs of stabilizing, with better than expected durable goods and home sales printing on Monday, although some offset came from the weaker than expected Dallas Fed manufacturing survey.

  • The US Citi EASI has risen in the early part of this week, see the chart below. The latest reading is -67%, versus a low of -79% late last week. We are still well off the positive levels recorded back in mid May, but the gap with the EU EASI has closed somewhat.
  • The Atlanta Fed nowcaster for GDP growth is also back in positive territory. The latest print is just under +0.26%, which is pointing to very modest growth, but compares with a mid-June low of -0.002%.

Fig 1: Citi US EASI Up Off Recent Lows


Source: Citi, MNI - Market News/Bloomberg

  • Whether this is the start of an improved period of data momentum remains to be seen. US financial conditions are off their recent highs, according to the Goldman Sachs Index, but remain well up on Q1 levels.
  • Also the weaker than expected Dallas Fed survey continues a poor run for regional Fed surveys in June, meaning that downside risks to this Friday's US ISM print arguably still prevail.
  • Current market estimates are at 54.5 versus 56.1 in May. Tonight the Richmond Fed index prints, with the market looking for a -5 headline outcome, following the -9 print last month.
  • Still, the USD has received some benefit to the extent that better data outcomes have helped US yields recover some ground. This is most evident in higher USD/JPY levels.
  • However, EUR has outperformed since the start of the week. EUR/USD is trying to get a foothold above 1.0600, with EU yields generally outperforming front-end US yields in recent sessions. We remain below recent highs though, see the second chart below.

Fig 2: EUR/USD & 2yr Spreads


Source: MNI - Market News/Bloomberg



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