USD gained further
- The USD gained further overnight with a short-lived hiccup following the Federal Open Market Committee (FOMC) minutes. The initial negative response to the FOMC minutes is largely attributed to FOMC participants generally viewing the economic effects of the decline in USD and rise in equity prices as more than offsetting the effects of the increase in nominal Treasury yields.
- Participants also seem to anticipate that US inflation would continue to gradually rise, with several expecting the decline in USD to likely help return inflation to 2% over the medium term. The subsequent USD recovery occurred as US Treasuries yields resumed their march upward.
EUR: Is the eurozone economy starting to lose momentum?
- Accompanying the slightly weaker February eurozone Purchasing Managers’ Index data, European Central Bank (ECB) sources return with a dovish nuance as there are reports that the ECB is likely to gradually revisit its communication rather than issue a significant change at the 8 March meeting to avoid a “wording deadlock”. Markets await the ECB minutes tonight.
Commodity Bloc: Further CAD movement depends on Canadian December retail sales and January CPI
- Tonight’s release of the Canadian December retail sales and January consumer price index (CPI) on Friday will provide updates on activity and inflation later this week, while NAFTA talks commence from 25 February to 4 March. Overall, Citi analysts expect a moderate gain in retail sales (except autos), but headline inflation year-over-year may slow due to base effects – which still leaves the Bank of Canada on hold until July.
This is an extract from the Daily Currency Update, dated 22nd February 2018. Please approach a Citigold Relationship Manager if you would like more information.