The monthly Core Durable Goods Orders (CDGO) economic figure was released last night, with devastating results. The Market was expecting a release of 0.3% from a lower previous figure of 0%. However, at a shock to the market the CDGO actually fell below the positive levels expected, to -0.4%, pushing the USD lower against AUD.
The CDGO’s figure is a revised figure from the Durable Goods Order (DGO) figure which includes the volatile variables of aircraft orders. However, both results were significantly negative; as the DGO come out below the expected 0.3% at -1.4%.
The US Federal Reserve is still in debate about the likelihood of interest rate hikes. The one decision has caused plenty of volatility off the back of the Fed speculation. The latest (what) of the Fed came from Charles Evans; essentially the Inflation rate and the underlying strength of the US economy is in questions still.
Evans said in an announcement last night;
‘Inflation is too low relative to the FOMC’s 2 percent objective. In fact, inflation has averaged just 1-1/2 percent for the past six years, and it is hard to see inflation heading up to target in the near term.’
Also, he told concerns of overestimating the recovery and strength of the US Economy.
‘One risk I worry about is that we begin to raise rates only to learn that we misjudged the strength of the economy. Another is that some disinflationary shock will hit as we drift along a low inflation path. In either of these cases, we would find ourselves in the extremely uncomfortable position of being forced to lower short-term rates back to their zero lower bound’.
Over in the Euro-zone, Germany has been finding its feet; in terms of business confidence. Germany is considered the motor that runs the Euro-zone. The Business climate figure has been increasing for the last five months. The market last night was expecting an indexed figure of 107.4 however during the time of release, the figure grew to 107.9.
As this survey is highly respected due to its large sample size and historic correlation with German and wider Euro-zone economic conditions, it tends to create a market impact upon release. Needless to say the AUD/EUR has now bounced off the 0.72 exchange rate and sits 0.8% lower this morning.
Overall the AUD seems to be on the back-foot again against most of the Majors, and may remain flat until key late Friday night announcements and figures from the USA, Euro-zone and the UK.