Week in Review: US GDP rises 1.0% in Q4 2015

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While risk aversion sentiment showed signs of easing, it was the Pound Sterling which saw one of the most volatile weeks in recent history. The sterling fell by over 2.50% this week. The currency weakened after London’s Mayor, Boris Johnson announced over the weekend that he would be supporting the Brexit’s ‘Out’ campaign just hours after British PM David Cameron got back from Brussels with renegotiated terms. GBPUSD touched 2009 lows, briefly trading at $1.3878 after falling from near $1.43. The Pound started to pullback since late Thursday but remains pressured to the downside.

Over the week, UK’s second estimates of the fourth quarter GDP was released, which came out unchanged at 0.50%. However, imports outstripped exports while business investment in the country fell sharply in the fourth quarter. With the June 23rd referendum date being announced, it is likely that business investment will continue to suffer from the uncertainty. GBPUSD is currently trading at $1.394 at the time of writing.

In the Eurozone, this week saw the flash manufacturing and services PMI data being released, both of which disappointed. Further alleviating fears of a slowdown, Eurozone’s consumer inflation was weak, rising 0.30% to the head and 1.0% on the core for the year. The ECB is expected to meet on March 10th, where further policy decisions could be announced including cutting the deposit rates further into the negative. EURUSD saw a subdued trading week with prices briefly breaking below the $1.10 handle while posting an intro week high to 1.105. German inflation data was weak alongside French CPI as well, highlighting the lack of any inflationary pressures in the Eurozone.

The Yen remained well supported across the board over the week but soon gave way as the Yen weakened around Thursday, in a relief rally. Early Friday, Bank of Japan’s consumer inflation data showed an increase of 1.10%, down from 1.30% previously. The slowdown in consumer inflation adds to the uncertainty of the BoJ’s policy actions in March with some expecting to see further expansion to the QQE program.

The commodity risk currencies were mixed this week with the Canadian dollar rising on Oil price rally. Data from Australia was mixed this week with construction work done for the quarter falling -3.60% while capital expenditure surprised, rising 0.80%, against expectations of a decline of -3.10%. The RBA is due to meet early next week and the Australian dollar could well post a retreat considering that the currency has managed to appreciate strongly over the past few weeks. The Kiwi, on the other hand, is looking to close the week in the positive. Trade balance data from New Zealand showed an increase of 8 million as exports grew more than imports, resulting in a trade surplus.

The US Dollar saw a broadly stronger week. The most notable data this week was durable goods orders which surged strongly, rising 4.90% on the headline and rising 1.80% on the core, beating estimates by a strong margin. The rise in durable goods for the moment puts a lid on speculation that US manufacturing was slowing down on account of the higher exchange rate of the dollar. Today, the second estimates for the fourth quarter GDP showed that the US economy expanded at a faster pace of 1.0%, against estimates of 0.40%. The second revised estimates were higher than the preliminary reading of 0.70%. Core PCE data for the month was also higher, rising 0.30% above estimates of 0.10%, with the previous month’s numbers being revised higher from 0.0% to 0.10%. Personal income and spending rose at a pace of 0.50%, cementing a solid all round data.

Economic events this week

  • Eurozone flash manufacturing PMI 51.0 vs. 52.1
  • Eurozone flash services PMI 53.0 vs. 53.4
  • Germany final GDP q/q 0.30% vs. 0.30%
  • SNB Chairman Thomas Jordan speech
  • US CB Consumer confidence 92.2 vs. 97.4
  • Australia construction work done q/q -3.60% vs. -2.10%
  • Australia private Capex q/q 0.80% vs. -3.10%
  • UK Second estimates GDP q/q 0.50% vs. 0.50%
  • Eurozone final CPI y/y 0.30% vs. 0.40%; Core CPI y/y 1.0% vs. 1.0%
  • US Core durable goods orders m/m 1.80% vs. 0.20%; durable goods orders m/m 4.90% vs. 3.0%
  • BoE Gov. Carney speech
  • New Zealand trade balance 8Mn vs. -250Mn
  • BoJ Core CPI y/y 1.10% vs. 1.20%
  • US GDP second estimates q/q 1.0% vs. 0.40%
  • Core PCE Price index q/q 1.30% vs. 1.20%
  • US Core PCE Price index m/m 0.30% vs. 0.10%
  • US personal spending m/m 0.50% vs. 0.30%
  • US personal income m/m 0.50% vs. 0.40%
  • UoM Consumer confidence 91.7 vs. 91.0

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