US data in focus as USD extends losses

Durable goods orders printed well above median forecast suggesting a solid recovery in June after two months of contraction. The headline gauge increased 6.5%m/m versus 3.9% expected and an upwardly revised figure of -0.1% in May. The upside surprise was essentially due to a sharp bounce in new orders for aircraft, thanks to the Paris Air Show (23-25 June). Excluding the volatile transportation components, core durable goods orders came in below estimates, printing at 0.2%m/m versus 0.4% expected and 0.6% previous reading. Overall, the report suggests that the manufacturing activity continues to expand at a moderate pace, while the anaemic demand for consumer goods such as vehicles and electronic products signals households’ consumption is not ready to take of yet, which is of bad omen for inflation.

Talking about inflation, the core personal expenditure index for the second quarter is due for release later today. The gauge is expected to have increased 0.7% (SAAR), down from a rise of 2% in the first quarter. Although the slowdown in inflation pressures has already been documented through the last months, financial markets are not immune to sharp adjustments should the gauge surprise in either direction.

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US Q2 GDP is anticipated to have accelerated to 2.7% (q/q annualised) compared to a reading of 1.4% in the previous quarter, mostly due to heightened expectations for personal consumption - 2.8% (saar) consensus and 1.1% in Q1.

On Friday, EUR/USD stabilised at around 1.17 after printing a multi-year high at 1.1777 on Thursday. The broad-based dollar weakness of the recent months was enhanced by the Fed’s dovish statement released on Wednesday. Investors will have to wait September to get further clarity on both the ECB and Fed thinking, which means the market will become more sensitive to economic data than usual, especially inflation figures.