US dollar unchanged despite disappointing GDP, durable goods orders amid stimulus hopes

The US dollar fell across the board on Friday (Jan 27) as data showed the US economy expanded less than expected in the fourth quarter and the durable goods orders continued to fall against expectations of a rise.

The US dollar had a knee-jerk reaction to the downside after the GDP data but it soon reversed the course. Reuters

The US dollar was unchanged despite the worse than expected Q4 GDP and goods orders data on Friday (Jan 27) as the market continued to focus on incoming trade and stimulus policies of the Trump administration.

The US economy expanded an annualised 1.9% on quarter in the three months to December, lower than a 3.5% advance in the previous period and below market expectations of 2.1%, as per advance estimates.

USD/JPY slipped to 114.73 from 115.14 following the data and EUR/USD jumped to 1.0716 from 1.0685. GBP/USD rose to 1.2562 from 1.2539. Within minutes, the major pairs returned to the levels before the data.

Bloomberg TV reported that International Monetary Fund Managing Director Christine Lagarde has said that Trump's policies will boost the US economy.

Against the Singapore dollar, the greenback dropped to 1.4254 from 1.4286 following the data but then swiftly rebounded to day's high of 1.4299.

Details showed that the deceleration in real GDP in the fourth quarter reflected a downturn in exports, an acceleration in imports, a deceleration in PCE, and a downturn in federal government spending.

New orders for US manufactured durable goods decreased by 0.4% month-over-month in December, extending an upwardly revised 4.8% drop in November while the market was looking for a 2.6% rise.

New orders for manufactured durable goods in December decreased $1.0 billion or 0.4 percent to $227.0 billion, the U.S. Census Bureau announced today.

The core PCE deflator slowed to 1.3% in the fourth quarter from the previous quarter's 1.7% while the market was expecting 1.7%

The President Trump is widely expected to announce stimulus packages to boost the world's largest economy, helping keeping the sentiment balanced.

Major US stock indices continued to trade near the fresh highs posted earlier in the day.

Analysts said the incoming earning reports and increasing business investment spending are positive for the equity markets even as the market is eagerly looking for the fresh trade agreements that the Trump administration is going to reach with its overseas partners in the coming months.

The market is waiting for the outcome of the meeting of UK Prime Minister Theresa May and the US President which is expected to give more clues about May's moves to make up for the negative impact of Brexit and Trump's trade preferences with the UK.