Declarations from central bankers continued with Nagel also stating that there is still a risk that inflation could come in higher than expected. Makhlouf and Vasle both voiced their support for continued hikes similar to December. It was a relatively muted day yesterday on the data front with the EUR taking direction from the USD. With a stronger USD into most of the afternoon session yesterday, we retraced back below the 1.09 figure. Today we only have money supply figures coming in at 9am. EUR/USD is starting the day at 1.0876.
EUR/GBP grinded lower into much of yesterday’s session printing comfortably below 0.8790. In the absence of headlines and much on the calendar today, we’re starting the day off with further pressure to the downside, currently trading at 0.8787. Attention will now turn to the BOE’s rate decision next week where the market is still expecting a 50bps hike.
The USD managed to gain some ground yesterday against other major pairs as we saw US Treasuries ticking up slightly. The US data also came in slightly better than anticipated.
Growth held up better than expected last quarter coming in at 2.9% QoQ saar vs 2.6% expected). However, it’s worth noting that 1.5pp of it was attributable to inventory growth, with net exports and the government adding 0.6pp each. Meanwhile, the GDP deflator slowed down less than anticipated, durable goods orders bounced sharply in December thanks to the one-off surge in non-defense aircrafts. The report also offered confirmation that inflation was slowing down, with the PCE price index (one of the Fed’s most favourite measures) up by an annualised +3.2% in Q4, the slowest since Q4 2020, whilst core PCE was up +3.9%, the slowest since Q1 2021.
Notably Initial jobless claims extended their decline last week. Weekly claims for the week ending January 21 came down to 186k (vs. 205k expected). That’s their lowest level since April.
Looking ahead today, data releases from the US include personal income, personal spending and PCE for December, as well as December’s pending home sales and the University of Michigan’s final consumer sentiment index for January