• Factory orders post a big increase
  • Business and consumer confidence up
  • IMF may cut off aid to Greece
  • Reserve Bank cuts cash rate

The US economic calendar was light yesterday.  The only meaningful data we saw was the March factory orders, which provided a hopeful signal of growth to come.

The factory orders recorded their biggest increase in eight months in March.  The report was welcomed by many dollar bulls – including myself – who have been looking for signs of a pick up.  You may recall, the first quarter growth data was dismal.

A 2.1% increase in orders for goods produced in U.S. factories bodes well for the economy because the gain was made despite the halt in capital spending in the oil industry after oil prices plunged.  The strong dollar also makes exporting more difficult.

The more encouraging news was orders for durable goods – products meant to last at least three years – jumped 4.4% after falling 1.4% in February.  Economists see durable goods as a good gauge for business and consumer confidence.  This reading is consistent with the Fed’s view that the economy remains sound, and the 1st quarter slowdown was driven by transitory factors.

may-5 graph

This morning, we will see April’s Institute of Supply Management Index read for services.   I’m betting that a streak of positive reports we have seen for the past several days will continue.  In turn, I expect the dollar to firm up a bit.  Stay tuned.

EUR-USD drifted lower yesterday after the news circulated that the International Monetary Funds was threatening to cut off support for Greece.  Today, the Eurozone producer inflation report will be released.  I expect no major market reaction.

GBP-USD continues to settle lower as the UK election uncertainty increasingly monopolizes the currency pair’s attention.  The pound lost about five points during the final run-in to the last election in 2010.

USD-CAD was uninspired to do anything yesterday as oil price volatility abated for now.  That said, today’s trade report may shake things up a bit. The market is expecting the trade deficit to have narrowed in April.

AUD-USD moved higher after the Reserve Bank of Australia cut the cash rate by 0.25% to 2.00% overnight.  The market thinks this may be the last cut for this year.

Have a great Tuesday!