US Dollar Takes Centre Stage
Good morning and it appears that Friday and the end of the week has crept up on us again. The markets seem to be returning to a semblance of normality as this newsletter is not going to make any mention of Greece (apart from that one), tensions in Ukraine or any other geo-political situations. Instead, we are going to look at some good, old-fashioned market fundamentals and data which seems to have gripped the market in the last 24 hours.
The US has taken its normal place at the head of the table again as the markets digested its core inflation data, durable goods data and the words of some Fed officials. Durable goods orders came in at a better than expected 208% which aided the USD rally. CPI data was interesting as although lower oil prices pushed the January figure to -0.7%, a level not seen since December 2008, the core CPI, which doesn’t include food or oil, rose unexpectedly by 0.2%. So, whilst oil is falling, most other prices are increasing, minimizing the risk of inflation not reaching their goal and ensuring that consumers are spending money elsewhere.
Sterling reached highs against the US Dollar before these results pegged it back, but is still on the rise against the Euro. The UK’s recent performance and outlook has certainly strengthened and if we were to assume that the current drag on inflation is simply due to the oil prices then we are still in pole position to be the first runner-up in the interest rate hike race.
Today, we have CPI out of Germany but most of the important data is coming out of the US, where we await GDP, home sales data, Consumer Sentiment and speeches from a couple of Fed members.
Have a good weekend!