This morning, the US Commerce Department released the Q3 2014 annual rate of growth number. The number shocked the analysts who had expected an upward revision to the previously released number of 3.9% but the average estimate was 4.3% growth. The actual number came in at 5.0%.
It was the fastest rate of growth since Q3 2003.
The market chose to focus on that number, sloughing off the disappointing Durable Goods Orders. They fell 0.7% in November. Analysts had been looking for a 3% increase.
The impact on the US Dollar was instantaneous. For the first time since April 2006 - more than eight years ago - the USDX hit the 90 level! The reason is quite simple - more and more of the recent data that the market has chosen to focus on suggests that the Fed's stated intention, to being normalizing interest rates next year, is on track. That continues to support the Dollar at the expense of the other majors due to the growth rate or interest rate differential. Money flows to where it can obtain the best yield, all things considered.
Here is an updated monthly chart showing the surge through the 90 level.
Look at the ADX line noted by the ellipse - it is rising solidly and is now above the 20 level. That indicates that this move is increasingly looking more and more like a long term trend of Dollar strength. The last barrier for the currency to scale now lies up near the 92 level. How it closes out this month/year, will therefore carry great significance for its fortunes in the early part of the New Year.
That same GDP data sent US equities higher with the Dow on track to hit the 18,000 mark. ( Note - it did just that as I am typing these comments). The Santa Claus rallying is underway in a big way!
Gold dropped lower - in an environment of steady growth, strong stocks, sinking commodities, strong Dollar due to the potential for rising rates, the asset simply has no fans except for all by the most dedicated gold bugs.
There are value-based buyers coming into gold down at these depressed levels but the momentum crowd seems to be losing interest in it quite rapidly. They are going after yield and for now, that yield lies elsewhere.
We still have some more economic data to look at yet this morning, namely consumer sentiment for December, consumer spending for November, new home sales for November and regional manufacturing data. We'll see if that data supports the continued strength in equities and the Dollar through the remainder of the session or not.
By the way, a quick note - a Brazilian central bank official today noted that falling crude oil prices will help combat inflation in that nation. He expects oil to stay down for most of 2015. We'll see how accurate that is.
