Morning Commentary: U.S. Exceptionalism Continues On

Foreign Exchange - Morning Commentary

U.S. Exceptionalism Continues On

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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
The U.S. economy continues to be one of the best stories over the past year as the economic expansion from 2009 gains momentum in one of the longest economic recoveries in the country’s history. Whether you agree or disagree politically, the Republican tax cuts and efforts to deregulate the economy have provided an extra boost to the 2% economy of the previous years.
 
What makes this story somewhat more remarkable is the fact that there has been a sharp slowdown in growth in many of our key trading partners (China, EZ). Given the interconnected nature of the global economy, with so much economic weakness elsewhere, it is remarkable that our GDP continues to surprise on the upside while many other key countries have experienced a loss of momentum and economic weakness.
 
U.S. GDP for Q4 2018 surprised on the upside this morning beating expectations of a 2.2% print and rising by 2.6%. This follows Q3 GDP of 3.4% and Q2 GDP of 4.2%. Business investment came in stronger than forecast while consumer spending was weaker down from 3.5% to 2.8%. Partially offsetting the stronger than expected GDP data, jobless claims for the latest reporting week rose to 225,000. U.S. interest rates are up slightly, U.S. equities are scheduled to open slightly weaker, and the U.S. dollar is mixed with European currencies outperforming and Asian currencies weaker.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • Asian currencies are generally weaker after a disappointing Chinese Manufacturing PMI report for February. Market expectations were for a 49.5 print but instead came in at 49.2 which is the lowest level since February 2016. This manufacturing report has been below the key 50 level (implying economic contraction) since December. New export orders fell again and are at the lowest level in 10 years. Asian equities were down sharply (Korea down the most) and Asian currencies weakened as fears continue to mount about potential further economic weakness in China impacting other Asian economies.
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