- U.S. preliminary GDP unchanged at 1.9% vs. projected 2.1% upgrade
- U.S. goods trade deficit widened from $64.4B to $69.2B vs. $66B forecast
- Chicago PMI jumped from 50.3 to 57.4 vs. 53.2 forecast in February
- Richmond manufacturing index improved from 12 to 17 vs. consensus at 10
- U.S. CB consumer confidence up from 111.6 to 114.8 in February
- FOMC member Harker: Three rate hikes possible this year
The Greenback made a solid comeback during the New York session, thanks to a boost from mostly stronger than expected data and more rate hike talk.
Mostly upbeat U.S. reports – Uncle Sam wasn’t off to such a strong start for the trading session as its preliminary GDP and goods trade balance figures fell short of estimates. Instead of being upgraded to 2.1% as expected, the Q4 GDP reading was maintained at 1.9%. The goods trade deficit, which shows the difference in value of imported and exported goods, widened from $64.4 billion to $69.2 billion in January versus the estimated $66 billion shortfall.
The mood picked up later on when the Chicago PMI was released since this indicated a strong climb from 50.3 to 57.4 in February, reflecting a much faster pace of industry growth compared to the projected rise to 53.2. The Richmond manufacturing index also beat expectations by advancing from 12 to 17 instead of dipping to the consensus at 10. Meanwhile, the U.S. CB consumer confidence index surged from 111.6 to 114.8 in February to reflect increased optimism instead of dipping to 111.3.
March rate hike talk from Fed officials – Fed official Harker had another testimony during which he repeated his projection that three interest rate hikes are possible this year. He predicted that U.S. inflation will hit the 2% target by late 2017 or early 2018, also adding that the economy is more or less back to full health.
For San Francisco Fed head Williams, the U.S. economy is also moving close to achieving their employment and inflation goals. He reiterated the need to act sooner rather than later in order to prevent the economy from overheating. Meanwhile, Fed official Dudley noted that recent data has been consistent with above-trend growth and that additional fiscal stimulus puts upside risks to their outlook.
Positioning ahead of BOC statement? – Economic data from Canada came in mixed as the raw materials price index printed a stronger 1.7% gain versus the 1.3% forecast while the industrial product price index fell short with a 0.4% uptick versus the estimated 0.5% gain. In other Loonie-related news, an OPEC report confirmed that member nations were able to achieve 94% of their output cut last month.
However, the Canadian dollar was one of the bigger losers for the day as traders seem to be gearing up for a dovish BOC decision. Recall that Governor Poloz mentioned that a rate cut is still on the table even though the central bank upgraded their growth forecasts for 2016 and this year.
Major Market Movers:
USD – The dollar sprang back to action upon seeing upbeat economic reports and also from anticipating that Trump will be announcing big infrastructure spending plans in a bit.
EUR/USD slipped from a high of 1.0631 to 1.0557, GBP/USD is down from a high of 1.2471 to a low of 1.2375, USD/JPY popped back up from a low of 111.68 to a high of 112.41, and USD/CAD surged all the way past the 1.3300 mark.
CAD – The Canadian currency chalked up losses across the board since Loonie traders seem to be bracing themselves for BOC dovishness.
CAD/JPY fell to a low of 84.18 from 85.73, EUR/CAD popped up to a high of 1.4081, GBP/CAD rose from 1.6390 to consolidate below 1.6500, and AUD/CAD is up to 1.0200.
- 12:30 am GMT: Australia GDP (0.7% expected, -0.5% previous)
- 1:00 am GMT: Chinese official manufacturing PMI (51.2 expected, 51.3 previous)
- 1:00 am GMT: Chinese official non-manu PMI (54.6 previous)
- 1:45 am GMT: Chinese Caixin manu PMI (50.9 expected, 51.0 previous)
- 2:00 am GMT: Trump’s testimony in front of Congress
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