U.S Dollar Recovers as Durable Orders Unexpectedly Grew

Dollar attempts to strength in early US session on the back of better than expected data. The headline durable goods orders rose 0.8% in April versus expectation of -0.5% fall. Ex-transport orders rose 0.1%, just missing consensus of 0.2%. The S&P Case-shiller 20 cities house price index rose 12.4% yoy in March versus expectation of 11.9% yoy. House price index rose 0.7% mom in March versus expectation of 0.5% mom. Stock futures responded positively and S&P 500 would likely open high and aiming at making new record high. While the greenback is mildly firmer, EUR/USD is still holding above 1.3612 temporary low. And, we could see some more consolidative trading below downside breakout.

In his speech before the ECB policy forum in Portugal yesterday, President Mario Draghi warned of ‘a negative spiral’ between ‘low inflation, falling inflation expectations and credit’ facing by the Eurozone. He stressed that the risk is even higher in stressed countries. He also indicated that, in addition to the disinflationary pressure, credit constraints are ‘putting a brake on the recovery’ in these countries. While not stating his assessment on inflation expectations, Draghi omitted the standard ECB reference that ‘medium- to long-term inflation expectations remain firmly anchored, in line with price stability’. In the speech, the President also discussed different policy actions in various scenarios. We expect the most likely move in June would be a cut in the main refi rate and the deposit rate.

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