US Economic Data Trumps Plan B In Boosting US Dollar

In a surprisingly pessimistic turn of events, US politicians have sunk deeper in debate over the impending Fiscal Cliff – and won’t likely seek a vote till after the US Christmas holiday.  However, with US economic data widely positive, it seems that concerns over the activation of tax increases and spending cuts have taken a back seat.  The notion is boosting the greenback against the British pound, which has already fallen from 1.6300 psychological resistance.


Plan B Busted


Yielding to anti-tax resistance in his own political party, House Speaker John Boehner repealed tax increases on earners of $1 million or more in his Plan B – detrimental to talks with Democratic leaders.  US President Barack Obama continues to push for taxes on higher income earners in the US, beginning from $250,000. 


The move is a blow to negotiations as it makes it sets the stage for a 25th hour showdown between political leaders following the Christmas holiday.  Both houses will go on holiday break and return to discuss other proposals on December 27th.  This leaves less than a week for both sides to come to an agreement to avoid more than $600 billion in tax increases and spending cuts to begin on January 1st.


US Economic Data Bullish


Nonetheless, the greenback is being widely supported as durable goods orders rose 0.7% in November according to Commerce Department data, beating expectations of a 0.2% gain.  The figure was widely bolstered by a 2.7% gain in capital goods, a sign that business investment surged in the month.


Wages and spending additionally moved higher for the month, with the employed earning 0.6% more in the month, as spending advanced by 0.4%.  Both are positive signs that US economic recovery notions are justified, at least in the short term.




The better than expected US data is helping to boost the US dollar in comparison to the pound sterling as UK economic data saw a weaker than expected advance for the third quarter was less than expected.  The final GDP reading rose by only 0.9%, compare to market analysts’ estimates that forecasted a steady 1% gain. 




With bullish sentiment backing the US economy on the session, it isn’t a surprise the GBPUSD has failed at resistance via the 1.6300 round figure.  As a result, focus has shifted to the 1.6155 support figure for the short term.  Penetration lower would bolster the notion of a 1.6062 support test.

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