Currency Updates:
U.S. Dollar Trading (USD) in an action packed day of trading we saw risk appetite take a hit after the US GDP surprised forecasters coming in -0.1% q/y for Q4. US stocks fell sharply but the USD struggled especially against the Yen and Gold. Later we had the FOMC statement where the FED didn’t surprise offering similar guidance to the market as in December with a commitment to keep rates low until the unemployment rate dropped below 6.5%. Looking ahead, Weekly Jobless Claims forecast at 350k vs. 330k previously. Also Chicago PMI forecast at 50.5 vs. 50 previously.
The Euro (EUR) the EUR/USD broke above 1.3500 going into London and quickly climbed to fresh trend highs above 1.3570 before consolidating for the rest of the session. The FOMC turned out to be a nonevent but with the USD weak after the GDP miss we expect the EUR/USD remain supported on the differencing monetary policy outlooks.
The Japanese Yen (JPY) was in play yesterday hitting fresh trend highs at Y91.40 before being clobbered by the shocking GDP Figures. The negative number looks ugly but the internal make up suggest the US is not doing as bad as the figure suggests. Most of the GDP miss has been put down to a change in inventories.
The Sterling (GBP) took advantage of the USD weakness to pare back some of the recent losses. Sentiment towards the Pound is weak but we have already has some considerable selling over the last two weeks on what is still unconfirmed rumors. Talk in the market that QE would be expanded at next week’s BOE meeting and that the UK may lose its AAA rating have been daily reasons for pound weakness. Looking ahead, German Retail Sales forecast at -0.1% vs. 1.2% m/m. January German Unemployment Rate forecast at 6.9% vs. 6.9%. German Unemployment Change is forecast at 8k vs. 3k previously.
Australian Dollar (AUD) the Aussie was sold across the board in a worrying sign for the bulls with most crosses trending against AUD. In Asia Thursday, we saw fresh trend lows to 1.0380 after a rating report suggested downside risk to the commodity powerhouse and to its biggest trading partner in China during 2013. Still the selling has been mild and the 1.03-1.06 large range is still holding so the change in sentiment towards the Aussie may be a temporary phenomenon.
Oil & Gold (XAU) Gold surged after the GDP report showed the world’s largest economy had turned negative in Q4. Analysts were quick to point out that it would be hard to stop bond purchases with figures like that. Friday’s Nonfarm payrolls will take on a bigger significance given the brightest spot in the US recovery has been in jobs so far this year. OIL/USD was able to shrug off the weak data and climbed to new trend highs above $98.
