Weak August orders for US Durables

EURUSD, Daily              

The U.S. durables report revealed weak August orders ex-transportation but surprising gains for transportation and defense orders, alongside particularly weak equipment data after downward revisions for both durable orders and equipment in July. We saw the expected weakness in shipments, alongside a small inventory rise.  Meanwhile, December rate hike bets continue to waffle around 50-50, according to Fed funds futures. Currently the December and January implied rates are suggesting about a 55% risk for a tightening at the December 13, 14 FOMC. There is a policy meeting on November 1,2, but the proximity to the November 8 presidential election is seen keeping policymakers sidelined. There’s also some concern over the potential for market instability with the October 14 deadline on money market reforms. We still expect a hike in December, especially given the three dissenting votes last week, including one from a policy dove, Rosengren. Economic growth should have picked up to the 2% region, while inflationary pressures should have continued to accelerate too, though not quite achieving the 2% target (the Fed only needs to see evidence prices are moving toward its goal).

The EURUSD was largely unmoved on the data with public announcements from both the ECB’s President Mr Draghi earlier today and the Fed Chair, Mrs Yellen still to come later today.