The Dollar failed to make any gains against the majors yesterday, dropping 0.1% versus the Pound and remaining relatively unchanged against the Euro despite a particularly positive report on U.S consumer sentiment. The Conference Board measure of consumer confidence reached the highest level in nearly five years this month as increased spending was propelled by the strong expansion of the U.S labour market and rising personal income. The index rose to a reading of 110.3 in January, the highest level since May 2002, and it seems increasingly likely that consumer spending will continue to support economic growth in the wake of the biggest housing slump in 17-years. The is a host of significant economic data released this afternoon in the States with the advanced estimate of U.S gross domestic product taking centre stage and it is widely anticipated that the economy expanded 3.0% in the fourth quarter led by increased spending as fuel prices dropped and wages rose. The Dollar has managed to claw back the recent gains made against Sterling overnight as we fall back through the major support level at 1.9600 and without doubt the focus this evening will fall on the FOMC rate announcement. The Federal Reserve are widely expected to hold interest rates steady at 5.25% but the tone and language used in the accompanying statement will be heavily scrutinized for an insight into future policy.
The Pound rose modestly against both the Euro and the Dollar yesterday, firming an additional 0.1% by the close of trading last night following a report from Nationwide, which showed that UK house prices had advanced 0.3% in January. However, the projected rise in prices was under expectations and combined with the slight drop in mortgage approvals over the same period, there is evidence to suggest that growth in the UK housing market may of peaked. The Bank of England have raised interest rates by 75 basis points since last August and with house prices increasing by the smallest amount since May, it seems evermore likely that higher mortgage rates are beginning to weigh heavily on the housing market. The Pound has come under sustained pressure against the majors overnight and that trend may continue this morning as UK consumer confidence is expected to fall modestly in the figures for January.
The Euro managed to hold firm against the Dollar yesterday and has advanced against Sterling overnight despite a surprisingly negative report on European retail sales, which dropped for the first time in 10-months in January. The index fell to an annual rate of 47.9, the lowest since February last year following the introduction of the value-added tax increase, which is obviously beginning to weigh heavily on German consumer sentiment. However, the Euro has found some support this morning as a separate report showed that German unemployment fell to the lowest level in five years in January as the fastest economic growth since 2000 encouraged companies to step up hiring. The jobless rate fell to 9.5% from 9.8% in December, the lowest level since 2002, and the report will perhaps provide an insight into the European unemployment gauge later this morning, which is expected to remain unchanged at 7.6%. There is a host of significant data released in the Euro-zone this morning with the focus falling on the flash estimate consumer price index, which is expected to show that inflation rose above the ECB’s 2.0% target, which may prompt further speculation of a rise in European interest rates.
Data Released 31st January
UK 10:00 Consumer Confidence (January)
EU 10:00 Flash CPI (January)
EU 10:00 Business Climate Index (January)
EU 10:00 EC Sentiment Index (January)
– Industrial / Consumer Confidence
EU 10:00 Unemployment Rate (December)
U.S 13:15 ADP Employment Report (January)
U.S 13:30 GDP – Advance (Q4)
– Deflator
U.S 15:00 Construction Spending (December)
U.S 15:00 Chicago PMI (January)
U.S 19:15 FOMC Rate Announcement
written by Adam Solomon
Related posts:
- The Dollar pushes under 1.8200 against Sterling for the first time in 2 months ahead of the FOMC rate announcement on Thursday
- The Dollar continues to strengthen against Sterling ahead of the FOMC rate announcement where Bernanke may signal a further rise in rates next month
- The Dollar continues to depreciate ahead of the FOMC Rate Announcement
- The Dollar continues to weaken against the Pound ahead of the FOMC rate announcement on Wednesday
- The Dollar continues to fall against the Pound ahead of the FOMC rate announcement
