The Dollar fights back

Yesterday’s markets

27th February 2015

  • GBP Second estimate of GDP 0.5%
  • GBP Preliminary business investment -1.4%
  • CAD CPI 0.2%
  • USD CPI -0.7%
  • USD Core CPI -0.2%
  • USD Unemployment claims 313k

Tuesday and Wednesday’s central bank speeches signalled the end of what has been a volatile start to the year and currency markets have continued to consolidate since. Dollar weakness has occurred across the board after Fed Chair Janet Yellen failed to give economists’ an interest rate rise timeline. Combined with this, Sterling data outperformed its counterparts and the Bank of England’s slightly hawkish tone helped to boost the Pound. Yesterday, the Dollar re-traced some of its earlier week losses after a raft of better than expected data was released including Fed Member James Bullard’s comments that signalled optimism in the US economy.

Firstly St. Louis Fed President James Bullard told CNBC that the key word “patient” should come out of the policy statement in March, this tone could lead markets to believe that there could be a rate rise this summer. Bullard also stated that “there’s too much focus about the first move, it’s really the path of rates that matter”. This hawkish comment contributed to yesterday’s Dollar boost.

The US released a raft of better than expected data yesterday afternoon. Durable goods from the world’s largest economy posted its best reading since August last year at 2.8% and core CPI (excluding volatile items such as energy and food) exceeded economists’ consensus at 0.2% on the monthly figure, whilst the annualised reading posted a positive 1.6%.

Today’s markets

26th February 2015

  • NZD ANZ Business confidence 34.4
  • EUR German Prelim CPI
  • USD Preliminary GDP 
  • USD Chicago PMI

Today’s docket will be dominated by German CPI in the morning, forecast to return to positive territory and US GDP in the afternoon. US second reading GDP is expected to decline from 2.6% to 2.1% after the Dollar strengthened substantially over the last quarter effecting overseas profits.