Is the US economy much stronger than believed?
It's starting to look that way. Yesterday there were some very strong new home sales numbers and today we got a full slate of upbeat numbers, including a large upward revision to Q2 GDP.
- US August goods trade balance -85.50 billion vs -95.20 billion expected
- US August durable goods +2.9% versus -0.5% expected
- US Q2 final GDP +3.8% vs +3.3% prelim
- US initial jobless claims 218K versus 235K estimate
As a result, the US dollar is up 35-50 pips across the board. EUR/USD is down to 1.1700, which is the lowest since September 11.
It's a similar story across the board and validates the strength in equity markets lately. The rub is that a big portion of the equity market rally is based on the idea of rate cuts and the strength in these numbers is a risk to the inflation outlook. In turn, Fed pricing further out the curve has shifted into a significantly less-dovish position. S&P 500 futures are down 33 points, or 0.5%.
