The US Census Bureau reported that Durable Goods Orders in August improved by 0.2% month-on-month (m/m) following a 5.6% decline in the previous reading.
The EUR/USD currency pair, one of the important barometers of global economic sentiment, found itself under pressure during the early Asian session earlier today, struggling around the 1.0500 mark.
A recent report from Fxstreets highlighted that one of the major drivers behind the weakening of the EUR/USD pair is the relentless strength of the US Dollar. The US Dollar Index (DXY), which measures the USD’s value relative to a basket of foreign currencies, climbed to 106.60, reaching its highest point since November last year.
Another key factor contributing to the Euro’s struggles against the US Dollar is the surge in US Treasury yields. The 10-year Treasury yield settled at 4.618%, a level not witnessed since 2007. Higher yields on US government bonds make the US Dollar more attractive to investors, as it offers the prospect of higher returns compared to other currencies and assets.
The Euro has also faced headwinds from discouraging economic data coming out of the Eurozone. Notably, the German Consumer Sentiment, as reported by GfK, fell to -26.5 in October, down from -25.6 in September. This decline suggests that consumer confidence in the Eurozone’s largest economy has waned, potentially signaling weaker consumer spending and economic activity.
US Durable Goods Orders Surpass Expectations
In a surprising turn of events, the US Census Bureau reported that Durable Goods Orders in August improved by 0.2% month-on-month (m/m) following a 5.6% decline in the previous reading. This positive data exceeded market expectations, which had anticipated a 0.5% m/m drop.
Durable Goods Orders Excluding Transportation also outperformed expectations, rising by 0.4% m/m compared to an estimated gain of 0.1%. Core capital goods orders showed even stronger growth, increasing by 0.9%, surpassing the market estimate of 0%. These figures bolstered the USD, leading to its gains against other major currencies, including the Euro.
Despite the USD’s strength, markets remain cautious due to various uncertainties. Risk aversion has been observed as investors grapple with the prospect of higher interest rates and the potential for an imminent government shutdown in the US. All eyes are on Federal Reserve Chair Jerome Powell, who is scheduled to address the public this week.
Meanwhile, market participants are keeping a close eye on forthcoming economic data releases. Preliminary inflation data from Spain and Germany for September, along with the Eurozone’s Consumer and Business Confidence data, are expected to provide insights into the health of the Eurozone’s economy.
In the United States, the release of the weekly Jobless Claims report, the third revision of Gross Domestic Product (GDP) for the second quarter, and Pending Home Sales data will be closely monitored.
Furthermore, all eyes will be on the US Core Personal Consumption Expenditure (PCE) Price Index, with expectations that the annual figure will ease from 4.2% to 3.9%. These data points will be instrumental in guiding traders’ decisions and determining the EUR/USD pair’s direction.