USD: Keep an eye on Waller's speech

27 Mar

FX markets have been struggling to find clear direction since the start of the week, with US data still giving contrasting signals. Yesterday, consumer confidence took a hit, as both the March and a revised February print ticked below 105.0. However, durable goods orders were strong and beat expectations. Our economists have looked closely at the non-defence capital goods orders ex. aircraft gauge, which came in at a solid 0.7% in February but was revised lower to a 0.4% contraction in January. This is the best leading indicator for business capex, which has been rangebound in dollar terms since May 2022, meaning it has actually declined in real terms. In other words, the strong economic and equity performance in the US is not being paired with any rise in investment.

Today, monthly wholesale sales and inventory revisions are the only data releases on the calendar along with the weekly MBA mortgage applications. It will be more interesting to hear what the Federal Reserve's Chris Waller has to say tonight (2200 GMT) on the economic outlook. Remember that about a month ago, Waller delivered a speech (“ What's the rush?”) that offered a good preview of what Chair Jerome Powell later communicated in congressional testimony and the March FOMC. That is, the Fed has the luxury of patience, but the overall expectations are optimistic on disinflation. Waller is generally considered a hawk, so it will be interesting to see how he reacts to the latest data releases.