Dollar Trades Sideways After U.S. Inflation Release
UK economy may be turning from headwind into tailwind for Sterling
This morning, the UK printed a positive growth number (0.2% MoM) for January, taking a first step to exit recession. The trailing 3-month GDP - so for November to January - only shows a very small (-0.1%) contraction. The positive GDP print was largely expected, and the Pound did not move on the release. Yesterday, UK wage data did its best to pull Sterling down from a seven-month peak on Tuesday but the economy is showing enough signs of improvement to persuade investors that the BoE will still have to keep interest rates higher for longer than its peers. Sterling dipped yesterday to around $1.277 after figures showed regular wage growth slowed slightly more than expected, to 6.1% in the three months to January from 6.2% previously, putting the Pound below Friday’s seven-month peak above $1.285. Yet the figures did not undermine the argument of Sterling bulls, who say the employment market remains strong and the economy is recovering after slipping into a recession. The Pound is still up roughly 0.4% against the Dollar this year, with the prospect of interest rates higher in the UK than elsewhere making British bond yields more attractive, boosting the currency. The calendar in the UK now quietens down before the Bank of England publishes its Inflation Attitudes Survey on Friday morning.
No Major Data.
EUR: ECB framework revision announced today
EUR/USD has survived a hot US CPI print, finding strong support above $1.0900 and reversing almost all initial losses in a few hours. In line with ING Bank's view, their USD view for the next few days, are for some downside risks for the pair as markets struggle to price in more Fed rate cuts without data providing some help. Today, the Eurozone calendar includes industrial production figures for January and speeches by two dovish European Central Bank members, the Executive Board’s Piero Cipollone and the Governing Council’s Yannis Stournaras.
Data 10.00: Industrial Production.
US CPI's upside surprise keeps early summer cut in play
The U.S. Dollar is having a tough time gathering recovery momentum early Wednesday, after posting modest daily gains yesterday after the CPI data release. The data from the U.S. showed that inflation, as measured by the change in the Consumer Price Index (CPI), edged higher to 3.2% on a yearly basis from 3.1% in January. On a monthly basis, the CPI and the Core CPI, which excludes volatile food and energy prices, both increased 0.4%. The benchmark 10-year US Treasury bond yield recovered above 4.1% after inflation data and helped the USD find demand. The risk-positive market atmosphere, however, didn't allow the currency to continue to gather strength. Early this morning, the 10-year US yield holds steady at around 4.15% and US stock index futures trade mixed. Looking ahead, the US economic docker will not offer any high-impact macroeconomic data releases later in the day. Eurostat will release Eurozone Industrial Production data for January.
No Major Data.