Economic data from the US released this week showed a robust start to 2016 and a better than expected end for the Q4 of 2015. Durable goods orders for the month of January increased at the fastest pace in 10 months on the back of increasing demand and lifting hopes that the US manufacturing sector was showing signs of a rebound. Data released by the US commerce department showed that orders for durable goods surged 4.90% while non-defense capital goods orders were up 3.90%.
Later on, the fourth quarter GDP numbers showed an increase of 1.0% in US economic activity, up from the initial estimates of 0.70%. Analysts were expecting to see a dip in the GDP to 0.30%. The GDP data was lifted by a larger inventory build-up and a net trade deficit. Although the Q4 GDP was strong, the fact that business inventories were already stockpiled is being seen as signs of weaker GDP growth in the Q1 of 2016. On Friday, Core PCE data showed an increase of 0.30% on a month over month basis, while rising 1.30% on a year over year basis. Although below the Fed's 2.0% inflation target rate the pickup in the PCE data was seen as positive for the Fed's rate hike cycle.
While economic data was positive for the US Dollar, the Euro and the British Pound continued to suffer losses. Eurozone inflation was flat with some of its big economies showing signs of a slowdown both in GDP and inflation terms. The Euro continued to retreat against the greenback this week as speculation for further ECB easing mounts ahead of its March 10th monetary policy meeting. The GBP remained focused on the Brexit uncertainty and continued to weaken significantly against the US Dollar.
Positive US Data Might Support Fed Tightening
Weekly Report - 28/02/2016