Market expectations for the Fed's interest rate prospects remain high, but the US dollar corrected after the release of Durable Goods Orders (DGO) data.

The US dollar index (DXY) fell from its two-month high at around 105.35 to a low of 104.54 in early New York trading on Monday (February 27th). Market expectations for the Federal Reserve's interest rate outlook remained high, but the greenback corrected amid various factors such as mixed Durable Goods Orders data and improved global sentiment.

dxy dailyDXY Daily chart via TradingView

The Durable Goods Orders (DGO) report released tonight showed mixed results. The headline DGO data fell sharply by -4.5% in January 2023, down more than the consensus estimate of -4.0%. Meanwhile, the headline DGO for December 2022 was revised downward from +5.6% to +5.1%.

The core DGO data posted a positive performance of +0.7%, far exceeding the estimate of +0.1%. However, the core DGO data for December 2022 was revised down from -0.2% to -0.4%.

MarketWatch claimed that the decline in DGO was related to Boeing's drop in aircraft orders, while other reports continued to grow well. Boeing received 250 contracts in December and boosted DGO data then, but orders fell to only 55 contracts in January.

The US Dollar Index plummeted after the release of the DGO data. Its position only started to rise again after the release of the Pending Home Sales data, which soared +8.1% compared to the estimate of 1.0%.

Simon Harvey, head of FX strategy at Monex Europe, believed that the slight improvement in investor sentiment today - as seen in the global stock market rally - is likely also weighing on the dollar. In addition, there is also a factor of fund outflows at the end of the month due to profit-taking after the strong greenback rally this month. He added that such fund flows are limited.

The US dollar exchange rate now shows varied performance in major pairs. AUD/USD and NZD/USD continue to be overshadowed at multi-month lows set last weekend. However, EUR/USD and GBP/USD rebounded quite rapidly in connection with the final agreement on the Northern Ireland Protocol.