USD shrugs off mediocre ecostats


Investors paid precisely zero attention to some discouraging US economic data on Friday. The two manufacturing sector purchasing managers' index readings from Markit (53.0) and the ISM (54.2) were lower on the month and below forecast. The University of Michigan's consumer sentiment index for February beat January's 91.2 but fell short of the provisional 95.5 figure published two weeks earlier. Yet the dollar had a reasonable day. It seemed that investors were still focusing on the stronger-than-expected fourth quarter GDP figure released the previous day.

The other thing investors appeared not to care about was the "off--the-script" speech delivered by the president during the weekend. In it, he again complained that Federal Reserve policy was making the USD too strong. Investors apparently saw no reason for the Fed to change its stance in pursuit of a more competitive currency.


Since Friday's inflation figures there have been no significant euro zone economic data. This morning's investor confidence reading from Sentix GmbH was better than expected: at -2.2 it was a point and a half higher on the month and easily beat the forecast -3.1. Yet it did nothing for the EUR, which weakened during the early London session. Monthly and annual increases of 0.4% and 3.0% in Eurostat's producer price index did nothing for the EUR either.

The EUR is 0.15% lower on the day and just about unchanged from a week ago. Despite Friday's US data investors still perceive the US economy to be in better shape than Euroland and they do not foresee any narrowing of the interest rate gap.


The investors who ignored Friday's disappointing US data did not accord the same generosity to the Canadian figures. Canada's economy expanded at an annualized rate of 0.4% in the fourth quarter, way less than the 2.0% growth seen in Q3 and only a third of the 1.2% forecast for Q4. The reaction was swift and severe: investors marked down the CAD by an almost immediate cent and it fell further into the weekend.  

Compared with Friday morning the CAD is 1.2% lower against the USD. A decent manufacturing sector PMI might have mitigated the loss but that, too, was disappointing: half a point lower on the month at 52.6.


The pound is unchanged from its position on Friday morning, despite swinging across a range of more than one cent. The only UK statistic this morning was the construction sector PMI. At 49.5 it was a point lower on the month, more than half a point below forecast and below the boom/bust dividing line at 50. The GBP did move lower on the news but it did not go far. Even with seasonal adjustment, the construction PMI for February is hostage to the weather and investors do not pay overmuch attention to it.

In the Brexit arena there is a sense that parliament might conceivably approve the government's Brexit withdrawal bill next week. There are said to be tweaks that will make the Irish "backstop" more acceptable and it could be that the fundamentalist Brexiteers will support it in order to avoid the risk of no Brexit at all. Either way, the March 29 deadline looks ever more likely to be postponed, if only for administrative reasons.


After the flush of Japanese data on Friday the JPY took a breather today. There was nothing at all to provide guidance and the yen wandered along a fairly narrow track to emerge unchanged on the day.

There is nothing due from Japan tonight either. Its best hope is for something new on the Sino-US trade negotiations but there seems to be no urgency on that front.

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