US durable goods data supports USD

Yesterday’s US data showed a rise of 0.4% in core durable goods orders in the month of August, measure including all goods rose by 0.2% against a market forecast of a contraction of 0.5%. This good news was enough to crush the little rally that we saw in the GBP/USD exchange rate and this pair is down to $ 1.2120 this morning. We lack UK data today but we will see US gross domestic product figures after lunch. The markets are expecting growth of 2.1% in the second quarter; up from 2.0% in Q1. However, there is also an expectation that the GDP price index will have dropped from 4.1% in Q1 to just 2% in Q2. Whether that will affect the thinking of the US Federal Reserve is another matter but one that may be addressed when the chairman of the Fed, Jerome Powell speaks later in the day, before publishing the Federal Reserve’s balance sheet.

German inflation slides, euro weakens

There were a number of concerns raised yesterday about the very low levels of lending to businesses within the eurozone. Corporate lending fell by 0.4% in August, reversing A generally improving trend in the early part of the year. There is a general air of nervousness around the eurozone economy. That was highlighted this morning when many of the German states published their inflation data and most have seen a slide in the pace of price increases. The euro has weakened across the board, with the GBP/EUR rate rising to €1.1545 and the EUR/USD rate dropping to $1.0485. As mentioned above, The US GDP data, due for release this afternoon is likely to have an impact on that latter exchange rate but we will have to wait until tomorrow to get UK GDP numbers and see what impact that has on the GBP/EUR rate.