Article Highlights

  • U.S. ISM manu PMI unchanged at 48.2 vs. 48.6 consensus
  • U.S. core PCE price index fell flat in Dec vs. 0.1% forecast
  • U.S. personal spending at 0.0%, personal income at 0.3%
  • ISM employment component down from 48.0 to 45.9
  • U.S. construction spending up by 0.1% vs. 0.6% forecast
  • FOMC Fischer: Inflation to remain low for “somewhat longer”
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The British pound was still the star of the forex show in the U.S. trading session while the Greenback lagged behind on weak data and downbeat Fed rhetoric.

Major Events:

Downbeat U.S. events – The ISM manufacturing PMI for January came in short of expectations, as the reading held steady at 48.2 instead of improving to the projected 48.6 figure. Its employment component fell from 48.0 to 45.9, reflecting a slowdown in hiring for the period, but the indices of new orders and production landed back above 50.0 to indicate growth.

U.S. consumers appear to be holding back on their shopping sprees, as personal spending was flat in December even while personal income increased by 0.3%. The core PCE price index, which is rumored to be the Fed’s preferred inflation measure, also printed a flat reading instead of showing the projected 0.1% uptick.

The U.S. dollar came under stronger selling pressure when FOMC member Stanley Fischer stepped up to the podium and started discussing how inflation might remain low for much longer. Recall that Fed policymakers are currently keeping closer tabs on price levels when it comes to deciding when their next rate hike might be and based on Fischer’s tone, the U.S. central bank might sit on their hands for a long while.

Lack of confirmation on OPEC meeting – Will the oil cartel have an emergency meeting to cut production or what? Slimmer odds of an OPEC huddle have started to weigh on crude oil prices, as reports indicated that Persian gulf Arab states don’t support this idea.

WTI crude oil slid from $34/barrel to a low of $31.25/barrel while Brent crude oil fell to $34/barrel upon hearing the news. Interestingly enough, this slump didn’t have that much of an impact on the Canadian dollar.

Major Currency Movers:

GBP – Stronger than expected U.K. manufacturing production data released in the London trading session was enough to fuel the pound’s forex rallies throughout the U.S. hours.

GBP/USD surged more than 300 pips for the day, reaching a high of 1.4440 towards the end of the New York session. GBP/JPY jumped to the 175.00 major psychological mark, EUR/GBP is breaking below the support at .7550, and GBP/AUD is trading above 2.0300 once more.

USD – The U.S. dollar retreated against its forex peers, weighed down mostly by Fischer’s cautious remarks.

USD/JPY dipped below the 121.00 handle to a low of 120.81, EUR/USD climbed back to 1.0900, USD/CHF retreated to a low of 1.0155, and AUD/USD is reached a high of .7121 before retreating to .7095.

Watch Out For:

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