Fundamental Comment

This Week: US GDP, Euro area CPI; UK PMIs


The most important events this week that could weigh on the movements of major currencies will be US fourth-quarter GDP, euro area CPI flash estimate and U.K. PMI reports.

US Dollar

The U.S. dollar managed to rebound from last week after hitting a three-year bottom the week before after the rise in U.S. treasury yields and the release of hawkish FOMC minutes for January’s policy meeting.

Recently, investors’ attention has been on the U.S. Treasury yields amidst concerns about widening U.S. budget deficit and escalating expectations of a quick pace of interest rate hikes this year.

Forecasts of widening budget shortfall, faster inflation and more Fed rate increases have pushed 10-year Treasury yields near four-year peak over the past couple of weeks.

Market odds of a March rate hike edged up from 72 percent in January to 86 percent this month due to the latest progress in growth and inflation data.

However, the second estimate for U.S. fourth-quarter GDP is predicted to show a downside revision to an annualized 2.1 percent from the first reading of 2.4 percent expansion.

A downside revision to growth could prompt policymakers to rethink about raising interest rates next month.

Eyes will also focus on important U.S. data sue this week, including durable goods orders, ISM manufacturing PMI and consumer confidence.


The euro retreated against the U.S. dollar last week after the release of lower than forecast euro area PMI data and dovish ECB minutes.

The final euro area manufacturing PMI due this week may confirm an ease in the pace of expansion in February.

However, investors would give more attention to the CPI flash estimate for the year through February, where it is forecast remain at 1.3 percent.

Low inflation could put addition pressure on the euro this week, especially as the latest ECB minutes showed policymakers bias to hold stimulus. 

Pound Sterling

The pound sterling slipped earlier last week after the release of dismal U.K. GDP, and unemployment data, yet it managed to gain some ground at the end of the week on optimism that British Cabinet were close to a unified line on Brexit.

Still, investors will continue to focus on any updates regarding Brexit talks, which is considered the key threat to U.K. economic outlook.   

This week, the U.K. will release its manufacturing and construction PMIs for the month of February, while the services figures will be out next week.

Manufacturing PMI will ease expansion to 55.1 from 55.3 in January, while construction will widen growth to 50.5 from 50.2, according to median estimates. 


Gold slumped last week, as the strength of the dollar lowered the appeal of the precious metal as an alternative investment.

Gold has faced some downside pressure last week on some profit taking by investors after hitting a three-week high the previous week ended February 16.

Any attempts from the dollar to resume its rebound could trigger more selling in the yellow metal, where the closest support is located near $1316 an ounce.

Regarding oil, it reported its second straight weekly advance last week as oil production stabilized and OPEC played down concerns about the rising U.S. output.

U.S. output stabilized at its record high of 10.27 million barrels per day in the week through February 16, the latest U.S. government energy report showed.

The same report showed that U.S. crude stocks unexpectedly dropped by 1.6 million barrels.

“I think the pace is excellent, the deal is working and we’re very happy with it,” United Arab Emirates Energy Minister Suhail al-Mazroui said last week.

For the week through February 23, the EIA report may signal U.S. crude stocks soared by 0.79 million barrels.

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