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US Dollar Falls Against Rivals on Weaker Business Investment in 2019

January 28, 2020 at 18:38 by Andrew Moran

Many different USD notes as a backgroundThe US dollar is falling against its major currency rivals on Tuesday as new data highlights an uncomfortable truth for the world’s largest economy: Business investment is weakening. That has not stopped the consumer from being bullish as confidence in the US economy has not been this high in more than 20 years.

In December, durable goods orders soared 2.4%, beating market forecasts of a 0.3% drop. However, the report did not signify sunshine and lollipops as the orders for long-lasting goods were driven primarily by military purchases. The Pentagon raised its orders for ships, fighter jets, and weapons systems. When these transactions are removed from the data, then US orders for durable goods fell 2.5%.

Also, the Census Bureau revised its numbers for orders in November downward. It initially reported a 2.1% slide, but durable-goods orders slipped 3.1%.

This is a bad way to end in 2019. Analysts warn that continued weakness in durable orders and business investment could impact the economy in 2020. Unless the private sector turns it around, the gross domestic product (GDP) may fall short of the 2% that many economists are penciling in this year.

The Federal Reserve Bank of Dallas’ manufacturing index contracted 0.2, while the Fed Bank of Richmond’s manufacturing index expanded to 20.

Business confidence may be subsiding, but consumer confidence is going through the roof. The Conference Board’s consumer confidence index rose from 128.2 in December to 131.6 in January. The last time it was this high was during the dot-com boom.

On the housing data front, new home sales dipped 0.4% last month, falling short of the 0.8% forecast. The S&P Case-Schiller Home Price Index edged up 0.1% in November.

Global financial markets are rebounding on Tuesday after suffering their worst day since October. Traders are seemingly optimistic about the Wuhan coronavirus situation improving, despite the Chinese government reporting more than 100 deaths and approximately 5,000 confirmed cases of the virus. To kick off the trading week, the leading stock indexes crashed by triple digits and the only somewhat bright spot was gold.

The US Dollar Index advanced 0.1% to 98.05, from an opening of 97.90, at 17:24 GMT on Tuesday.

The USD/CAD currency pair slumped 0.12% to 1.3180, from an opening of 1.3195. The EUR/USD dipped 0.05% to 1.1015, from an opening of 1.1019.

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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