4th Quarter GDP Numbers May not be Enough for the Dollar

Earlier in the Day:

Economic data out of the Asian session this morning was limited to Japan’s December inflation figures, which showed that national core inflation held steady at 0.9%. The economic recovery has continued to fail to drive inflation towards the BoJ’s 2% objective and the latest figures are further evidence that the BoJ is unlikely to begin making its move towards neutral any time soon.

To make matters worse, Tokyo’s January core consumer prices rose by 0.7%, easing from December’s 0.8%, with the next area of focus for the markets being the annual wage negotiations in a few months, with wage growth needing to accelerate to support domestic consumption and build inflationary pressures.

The Yen moved from ¥109.537 to ¥109.598 upon release of the figures, with the markets largely brushing aside the BoJ’s December monetary policy meeting minutes released a little later in the morning.

At the time of writing, the Yen was up 0.16% to ¥109.23 against the Dollar, with the Aussie Dollar rally in full swing, gaining 0.44% to $0.8061, recovering most of Thursday losses.

In the equity markets, it was a mixed bag, with the Nikkei under pressure from a stronger Yen, down 0.16% by the close, while the Hang Seng and CSI300 were in recovery mode, up 1.46% and 0.58% at the time of writing.

The Day Ahead:

It’s a quiet day ahead for the EUR, with no material stats scheduled for release this morning. The lack of data doesn’t suggest that the EUR won’t be a currency of interest however, with the latest from the U.S administration and the ECB press conference, continuing to provide the EUR with support.

While the general view was that Draghi would seize the opportunity to jawbone the EUR in response to Mnuchin’s Wednesday chatter, Draghi talked up the Eurozone economy and the prospects of inflation reaching the ECB’s close to 2% target, while just highlighting that a stronger EUR would have an impact on the economy.

Eurozone economic data this week has been upbeat and that’s with the EUR sitting at around $1.19 levels through the latter part of last year. While global economic growth remains buoyant, demand for European goods will likely remain, which should ease any immediate concerns on the outlook for the Eurozone economy with the EUR at $1.24 levels.

At the time of writing, the EUR was up 0.40% to $1.2446, recovering from Thursday evening’s slide back down to $1.23 levels by the close.

For the Pound, it’s another big day, with 4^th quarter GDP numbers scheduled for release. Forecasts are for the UK economic growth to hold steady at 0.4% quarter-on-quarter, while slowing from 1.7% to 1.4% year-on-year.

The markets will likely be able to swallow the numbers, though anything weaker and we will expect the Pound to take a hit, soft Brexit or not.

Later in the day, BoE Governor Carney will also be speaking, which could provide some further direction, this time around the BoE Governor likely to have little issue with the uptick in the Pound as the BoE continues to fight inflation.

At the time of writing, the Pound was up 0.40% to $1.4199, with the Pound having lost some ground from the mid-week highs following President Trump’s hawkish remarks on Thursday

Across the Pond, key stats this afternoon include December’s durable goods orders, 4^th quarter GDP figures and December’s goods trade data.

Key drivers will be the GDP and durable goods order numbers, with the Dollar bulls in the need of a lift, as even the U.S President is unable to bring the slide to an end, the Dollar Spot index down 0.40% to 89.031 at the time of writing. Outside of the data, any comments from the administration will also be a factor, as the U.S President and U.S Treasury Secretary contradict each other on sentiment towards the Dollar.

For the Loonie, its December inflation figures and, if forecasts are anything to go by, the Loonie could be in for a tumble this afternoon, with NAFTA talks having eased pressure on the Loonie through the week.

The Loonie was up 0.31% to $1.2339 against the Dollar at the time of writing.