Surprise, surprise: U.S. exceptionalism might be back
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SURPRISE, SURPRISE: U.S. EXCEPTIONALISM MIGHT BE BACK
The U.S. economy has driven global growth, while Europe and China have struggled over the last two years. But as the Fed kicked off its easing cycle with a jumbo cut, some wondered whether that signalled policymaker concerns about U.S. growth.
Fed Chair Jerome Powell quashed some of those worries this week when he said the central bank was not "in a hurry" to get rates lower, as recent data boosted confidence in the outlook.
In fact, Citi's economic surprise index for the U.S. .CESIUSD - which measures on aggregate whether economic data has beaten or missed expectations - turned positive on Tuesday for the first time since May. A reading above zero indicates data has generally been stronger than expected.
On the other hand, Citi's surprise indexes for China .CESICNY and Europe .CESIEUR remain mired below zero, while the UK .CESIGBP slipped into negative territory on Monday, indicating that British data has been weaker than expected.
For investors, this might signal that recent dollar weakness has run its course for now, particularly after Powell's more hawkish comments.
Bond spreads may also support this view, with the gap between U.S. and German 10-year yields DE10YT=RR widening to 170 bps on Wednesday, having been below 150 bps as recently as Sept. 19.
"Spreads have shifted relatively significantly in favour of the USD over the past few sessions," noted Scotiabank chief FX strategist Shaun Osborne on Tuesday, "suggesting the DXY may be able to recover a little more ground in the short run at least."
The dollar index =USD, which measures the U.S. currency against six others, hit its lowest since July 2023 on Friday, having dropped almost 5% in Q3, its biggest quarterly fall since Q4 2022.
(Samuel Indyk)
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Surprise, surprise: U.S. economic surprise index turns positive https://reut.rs/3zH1b2h
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