US Dallas Fed manufacturing index falls

April 26, 2016

FX News Today

European Outlook: The decline on global stock markets continued in Asia overnight, with most markets in the red. UK stock futures are posting slight gains; however as oil prices managed to claw back some losses and the front end WTI future moved above USD 43 per barrel after falling to an earlier low of USD 42.64. A stronger Yen added to pressure on Japanese markets ahead of the BoJ meeting later this week, while the fact that the EUR is holding below 1.13 to the dollar will be welcomed by Eurozone investors. Markets are cautious ahead of this week’s central bank meetings, with the Fed meeting starting today. The local calendar is very quiet with only UK BBA mortgage approvals and French jobseekers.

US Sentiment Mixed Signals: The Empire State and Philly Fed reports revealed opposing April headlines, with a big gain for the Empire State but a dramatic plunge for the Philly Fed. We think the March sentiment upswing will mostly survive this early-April divergence, with a drop-back in the ISM-adjusted average of the major measures to 51 after the March pop to 53 from lower 49 averages in both January and February. The price measures of both surveys were firm, and price gains into April should sustain firmness in the remaining April surveys.

US Dallas Fed manufacturing index falls: The index slipped to -13.9 in April from -13.6 in March, a 16th consecutive monthly decline, though the pace of decline is only about 1/3 of what it was in January. The employment component improved to -3.7 from -10.3, but remained in contractionary territory for a 4th straight month. The workweek was -1.0 from -5.6. New orders jumped to 6.2 from -4.8, and are the highest since October 2014. Prices paid rallied to 5.5 from -0.2, and are in positive territory for the first time since June, with prices received at -6.6 from -8.2. Capital expenditures rose to 1.6 from -0.9. However, the 6-month general business activity index eroded to 0.4 from 6.1, with employment weakening to 9.4 from 13.0, though new orders improved to 32.6 from 29.7, with prices paid edging up to 20.2 from 18.9. Capital expenditures dipped to 8.5 from 13.3. This is a mixed report with some signs that the recession in the region is easing, though the slide in some of the future indicators is disappointing.

US New Home Sales mixed: New home sales saw a 1.5% March drop to a 511k rate, but with prior boosts that left a stronger than expected 515k Q1 sales rate that matched the cycle-high in Q1 of 2015. Inventories beat estimates after upward revisions to leave a six-year high, though median prices fell 3.2% in March after downward revisions to leave a 1.8% y/y decline

Main Macro Events Today

US Durable Goods: March durable goods data is out today and we expect orders to grow 1.0% (median 1.9%) on the month with shipments down 0.5% and inventories down 0.2%. This follows respective February figures of -3.0% for orders, -1.0% for shipments and -0.3% for inventories. Data in line with our forecast would leave the I/S ratio steady at 1.66 for a second month.

US Consumer Confidence: April consumer confidence is also out later today and should reveal a headline decrease to 95.5 (median 95.8) from 96.2 in March. This would fit with the broader trend of confidence declines in April where we saw a Michigan Sentiment decrease to 89.7 from 91.0 and an IBD/TIPP decline to 46.3 from 46.8.

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