US Dollar (USD) Exchange Rate Gains on Euro, Pound after US Data

The US Dollar strengthened across the board during the North American session, registering 1.4% gain against the Euro, an over 0.7% gain against the Pound and a 0.5% advance against the Swiss Franc. The ‘Greenback’ was also bullish against the Canadian and Australian Dollars. After declining this week as a result of slightly dovish comments from Federal Reserve Chairwoman Janet Yellen, the US Dollar was able to stage a rebound thanks to impressive domestic data. US Durable Goods Orders were shown to have fallen by a negatively revised 3.7% in December, but surged by 2.8% on the month in January – considerably more than the 1.6% increase anticipated by economists. Industry expert Joseph LaVorgna said of the result; ‘With these kinds of broad-based job gains, it seems like a lot of sectors are contributing and that’s generally a good sign for all sorts of spending, including cap-ex. We’d be doing better if global growth was stronger.’

Meanwhile, the US Consumer Price Index confirmed that the pace of inflation in the world’s largest economy fell into negative territory in January. Non-core CPI was down -0.7% on the month and -0.1% on the year, marking the first annual decline for five years. The slide was, in the main, due to the impact of lower oil prices. According to Capital Economics; ‘The annual rate of inflation fell to -0.1%, which is technically a ‘deflation’. But this deflation is nothing to worry about. For a net importer of oil like the US, lower gasoline prices are a good thing.’

Federal Reserve policymaker James Bullard also maintained an upbeat attitude regarding US consumer prices. He stated that inflation is likely to rebound and that the Fed should stop being ‘patient’ when it comes to adjusting interest rates. He stated; ‘If we [take the word patient] out then we can move at any of the meetings during the summer. If expected inflation goes back to more normal levels then I’d have confidence that actual inflation would follow behind. Through the spring here we’ll have to see evidence of that.’ The US Dollar to Pound Sterling exchange rate was trading in the region of 0.6484 after the data was published. Further USD/GBP exchange rate movement is likely to occur tomorrow as the UK releases its GfK Consumer Confidence survey and the US publishes annualised fourth quarter growth figures. The US Pending Home Sales report will also be of interest.