US Dollar Stays Firm Despite Slowing of GDP Growth in Q4

Market Reviews

The euro is consolidating against the dollar after yesterday's sharp collapse on the statements of the new head of the Fed, Jerome Powell. At the same time, today's preliminary data on inflation in the Eurozone did not have a significant impact on investor sentiment. Official figures from the EU’s statistics agency Eurostat showed the headline inflation rate fell from 1.3% yoy to 1.2% yoy in February, its weakest level since December 2016. However, core inflation, which excludes volatile food, energy, alcohol and tobacco prices, remained steady at 1%.

British pound fell sharply today after European commission published its own draft Brexit withdrawal treaty. A 119-page draft agreement on Brexit does not provide for a rigid border between the Republic of Ireland and Northern Ireland. EU chief negotiator Michel Barnier said that it is necessary to accelerate the EU-UK talks. Regarding the Brexit bill, the draft treaty requests the UK to make two payments per year to EU after 2020 to settle its financial obligations.

US dollar stays firm on expectations of Fed’s rate hikes. The new Fed Chair Jerome Powell’s assessment on US growth outlook was upbeat, describing growth and the employment market as strong. Powell reiterated the gradual path to monetary policy normalization. This could point out a faster pace of rate increase this year.

The US economic growth slowed slightly more than initially thought in the fourth quarter of 2017. Data from the Commerce Department showed, that GDP expanded at a 2.5% annual rate in the final three months of 2017, instead of the previously reported 2.6% growth. GDP price index was revised lower to 2.3%.

German unemployment fell by 22k in February, unemployment rate was unchanged at 5.4%. Swiss KOF economic barometer grew to 108.0 in February. Japan retail sales increased by 1.6% yoy in January versus expectation of 2.5% yoy. Japan industrial production declined by 6.6% mom.