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US Dollar Flat Amid Higher Industrial Output, Housing Starts

December 17, 2019 at 19:19 by Andrew Moran

A sheet of US 100-dollar bills up to the horizonThe US dollar is relatively flat against most major currency rivals on Tuesday, despite some positive news for the world’s largest economy. The latest data helped legitimize the bulls’ views that the US economy is strong and resilient, thanks to higher industrial production, housing starts, and manufacturing activity. With only two weeks left in the year, investors are bracing for the final gross domestic product (GDP) reading for the third quarter, durable goods orders, and personal income and spending levels.

According to the Federal Reserve, industrial output climbed 1.1% in November, up from the 0.9% decline in October. This is higher than the market forecast of 0.8% and represents the best jump since October 2017. The biggest contributing factor to this gain was General Motors employees returning to work and restarting automobile and motor vehicle parts production.

Manufacturing output also advanced 1.1% last month, up from the 0.7% contraction in October. Capacity utilization jumped from 76.6% in October to 77.3% in November. This comes one day after the IHS Markit manufacturing purchasing managers’ index (PMI) for December clocked in at 52.5, beating median estimates of 52.2.

Could this support the view that the factory sector is stabilizing? Or, is this just a blip in the radar as the industry continues to face shrinking global trade flows and a decline in investments? Financial markets should get a better look in 2020 when there is more certainty.

On the housing front, new Census Bureau figures reported that building permits rose 1.4% last month. Although it is down from the 5% surge in October, the November reading defeated market expectations of -3.2%. Housing starts increased 3.2%, topping the market consensus of 2.5%.

Foreign investors were a bit more cautious in October when it came to acquiring US assets. The Treasury Department reported that overseas investors sold $48.3 billion in US assets, but they did buy $16.8 billion in long-term US securities.

The USD/CAD currency rose 0.05% to 1.3166, from an opening of 1.3157, at 18:11 GMT on Tuesday. The EUR/USD edged up 0.04% to 1.1150, from an opening of 1.1159.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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