There was risk on sentiment in global markets today especially after upbeat US GDP data. Oil helped risk appetite as well as prices rallied 3% after rising from below $33 to rise above $34 before easing back down. Oil is set for a weekly rise as strong US gasoline demand and hopes of OPEC action outweighed concerns of oversupply.
The dollar gained across the board and pressured the euro back below $1.10.
A series of data out of Europe today did not help the single currency. German, French and Spanish CPI data for February all disappointed. Slowing inflation figures from three of the largest Eurozone economies will likely create concern and pressure the ECB to take action at its policy meeting next month. All eyes now turn to the flash CPI estimate for the whole of the Eurozone on Monday. The headline CPI rate for February is forecast to come in at 0% year-on-year versus 0.3% in January. This is well below the ECB’s target rate of 2%.
Meanwhile there was more disappointing data out of the Eurozone. A report showed that the region’s economic confidence index slid for a second month in February to print the lowest reading since June at 103.8, down from 105 in January. This missed forecasts of a 104.3 reading.
The pound remained under pressure near seven-year lows. After a brief attempt above $1.40, it fell back below this key level against the dollar as UK data out today on housing and consumer confidence suggested that Brexit concerns are having a real impact on the broader economy. A broadly stronger greenback did not help sterling.
A raft of data out of the US today attracted much attention as most were upbeat. The second estimate of fourth quarter GDP was revised higher to a reading of 1% from the previously reported 0.7% estimate. Economists expected a reading of 0.4%.
The dollar immediately jumped after the GDP data, surging above the key 130 yen level. The pair continued to rise and reached a one-week high of 113.78 after more upbeat US data. The core PCE index (personal consumption expenditures index which excludes food and energy), increased 0.3% in January, compared with an increase of 0.1% in December. This data point is closely watched by the Fed and so the stronger number would increase the chance of a rate hike either in March or June.
Another piece of upbeat US data was the University of Michigan consumer sentiment report. The final version for February was released today and the index was revised higher to show a reading of 91.7 compared with a previously reported reading of 90.7. It also beat estimates for a forecast of 91.1.
Attention now turns to a speech by Federal Reserve Governor Lael Brainard at 1:30 p.m. ET. She will be speaking at the US Monetary Policy Forum in New York.
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