US dollar gets stronger after the US provided five data points at once, and while the first reaction was small US dollar strength, it has subsequently reversed. Markets for bonds and stocks are mostly unchanged.
There are always good and bad things in vast amounts of data. The key release is the GDP figures, and while growth was slightly stronger than expected, much of that was due to government spending and inventory expansion.
We believe that some of the secondary USD selling was caused by the inflation numbers in the GDP report, which come ahead of tomorrow’s PCE data and imply it would be weak. The report on the advance trade was likewise weak.
Positively, US first jobless claims fell to their lowest level since April, and there are no indications of adverse layoffs outside of the overextended tech industry.
This demonstrates the dangers of a consistently tight job market, which might have a domino effect on inflation and drive the Fed to maintain significantly higher rates for extended than the market would prefer That’s good news for the US dollar, but at the moment, inflation is getting more attention.
