US business inventories rise moderately in August
The latest data indicates a moderate increase in US business inventories for August, driven by robust sales growth. This development suggests a healthy demand scenario, crucial for sustaining economic momentum as we head into the final quarter of the year. The implication of rising inventories could put upward pressure on the USD, as traders anticipate stronger GDP forecasts that may support the Federal Reserve's policy stance. Market participants will be closely monitoring upcoming reports for further indicators of economic health.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). This positive data aligns with the view shared by several firms suggesting that strengthening economic fundamentals may bolster the dollar's position.
How firms align
Goldman Sachs is aligned with this outlook, targeting 1.10 for the EUR/USD pair, reflecting a bullish sentiment driven by strong domestic economic indicators. In contrast, BofA's forecast suggests a contrary position with a lower target of 1.04, indicating caution around potential economic headwinds. This contrast exemplifies the diverging perspectives on economic resilience and its influence on the FX markets.
What the data shows
Recent reports indicate a stronger-than-expected sales growth which necessitates an upward revision in GDP forecasts. This aligns with potential upward pressure on the USD as economic confidence grows. See our related Insight on US economic indicators at /research/us-economic-outlook.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01US business inventories rose in August, signaling healthy economic demand.
- 02Economic resilience may bolster USD as traders anticipate stronger GDP growth.
- 03Watch for upcoming economic reports that could further influence USD positioning.
Market implications
Traders should monitor the upcoming US jobs report for any signs of economic strength that could reinforce the USD's trajectory. The consensus targeting around 1.075 for EUR/USD may be re-evaluated based on the data's implications.
Risks to this view
Any significant surprises in upcoming economic releases, particularly related to inflation or job growth, could force a reevaluation of the USD outlook. A weak jobs report might trigger a downward adjustment in forex targets.
Sentiment by currency
USD~EUR~JPY~GBP~Composite USD score: +0.00
Sources & References
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