Lower-than-expected US Durable Goods Orders result in USD weakness

“Ahead of Wednesday’s eagerly awaited FOMC statement, when investors will be paying close attention specifically to the possible timing for a US interest rate rise, optimism for a rate rise as early as March has effectively been swept away by a far worse-than-expected Durable Goods Orders performance. Durable Goods for December decreased by far more than forecast at 3.4%, which is resulting in USD weakness against its main counterparts.

Following such a disappointing economic release, there is going to be serious concern that the Federal Reserve may become tempted to delay its first rate hike. This is the main catalyst behind the USD weakness. However, some suspicions are also likely to arise that the US economic momentum is slowing down without QE. While the Durable Goods data does show that US economic momentum is slowing down, this was always likely to be case after the US economy expanded by an incredible annualised 5% during the previous quarter.

In regards to the concern that the Federal Reserve might delay raising US interest rates, we always expected that March/April would be too early to expect an interest rate hike. Although most appear to be expecting the Fed to raise rates in June, I currently think that September is still the most likely time frame.”