U.S. Factory Orders Drop, Fed Expected to Hold Rates: Key Insights

Key Insights

  • Factory Orders decreased by 3.6% month-over-month in October
  • Factory Orders ex Transportation declined by 1.2%
  • SP500 pulled back towards session lows after the release of the report

On December 4, U.S. released Factory Orders report for October. The report indicated that Factory Orders declined by 3.6% month-over-month, compared to analyst consensus of -2.8%.

Factory Orders ex Transportation declined by 1.2%, while analysts expected that they would grow by 0.3%.

FedWatch Tool indicates that there is a 99.7% probability that Fed will leave the federal funds rate unchanged at the upcoming meeting on December 13. Markets have already started to prepare for rate cuts in the first half of the next year.

In fact, traders expect that Fed will cut the federal funds rate to 500 – 525 bps at the meeting in March. The federal funds rate is expected to reach 400 – 425 bps by the end of 2024.

At this point, the Factory Orders report should not have a major impact on Fed policy outlook. The recent PMI reports showed that the manufacturing sector remained under pressure, but the overall economy remained in a decent shape.

U.S. Dollar Index continues its attempts to settle above the resistance at 103.50 – 103.75. Treasury yields are moving higher, providing some support to the American currency.

Gold pulled back towards the $2050 level in a wild trading session. Today, the price of gold hit all-time highs above the $2100 level but failed to develop additional momentum as traders rushed to take profits off the table.

SP500  moved back towards session lows near the 4560 level after the release of the Factory Orders report. SP500 needs significant positive catalysts to settle above the 4600 level.

For a look at all of today’s economic events, check out our economic calendar.

Summary
– Factory Orders
– SP500
– Fed policy
– U.S. Dollar Index
– Gold
– PMI reports

The release of the Factory Orders report and the Fed policy outlook can impact forex trading, particularly affecting the U.S. Dollar Index and gold.

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