New Home Sales, Durable Goods Orders Show Strength
Ashraf Laidi | Nov 25, 2020 11:50PM ET
by Adam Button
The dollar lagged again Wednesday despite a risk-averse tone while the kiwi led the way. A wave of US economic data ahead of the holiday highlighted several continuing trends, which we explore in today's note. The chart below raises doubts over gold's direction in absolute and relative terms.
The boom in housing isn't a uniquely American phenomenon but it's heating up quickly there. New home sales in October rose 999K compared to 975K expected. The prior was also revised higher and sales are up 41% y/y.
This is a secular trend but also highlights the greatest power of all in financial markets: interest rates.
h2 2) Trade/h2One of Donald Trump's most powerful promises was to improve US trade but the October trade balance report showed that even Presidents can't break the rules of economics. There was an $80.2B deficit, which was nearly in-line with estimates but the larger picture is a declining trend from roughly $65B monthly deficits when he took office. That steady flow of money out of the US is a powerful force and a long-term dollar drag.
h2 3) The power of government spending/h2The US, UK and Canada are the three biggest spenders during the pandemic with outlays of 14-18% of GDP. That spending kept a human tragedy from turning into an economic one but in the US at least, the money is beginning to dry up. Wednesday's PCE report showed income dropping a surprise 0.7% versus +0.4% expected. On the flip side, there's renewed talk of US student loan forgiveness.
h2 4) Manufacturing strength/h2We're still in the dark about the underlying strength of the manufacturing sector. We recently got two Fed reports that showed some softening but core manufacturing orders and shipments in the October durable goods report were strong. One of the big surprises of the pandemic has been how well that sector has held up but whether it continues is an equally big question mark.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.