The U.S. Dollar is trading in weaker ranges following the release of economic data in the form of Gross Domestic Product growth showing a better situation than expected.
Overview
As of now, market reaction to Q4 and yearly GDP has been punitive to the buck while jubilant for equity exchanges. The U.S. economy climbed 2.9% versus the 2.6% forecast for Q4, while Durable Goods Orders came out by more than twice the estimate at 5.6% vs. 2.5%. The labor market stayed strong, with Initial Jobless claims coming in at less than 200K, 186K exactly. Indeed, these indicators help in the fear of a recession fading away.If the economy is strong, but yet suppliers per Purchasing Managers Index figures are taking a hit, it means the Federal Reserve can afford to take its foot off the gas when it comes to increasing borrowing costs. Their interest-rate hikes have prevented expansion but not crippled the economy while slowing down price growth. This bodes poorly for the buck, as our yearly outlook for 2023 points out.
What to Watch Today…
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EUR ⇑
The Euro is looking to keep rising as the situation in the U.S. also looks good for the rest of the globe, hoping to avoid financial pains in 2023. It is a contrast from most of the talk out of the Davos Economic Summit, but one where European financial decision-makers spoke with confidence about their plight. Regardless of the war’s tolls on all industrial sectors and supplies of all items, the European Central Bank and others believe the very worst has been overcome.As such, the ECB plans to tighten its monetary stance, and traders are guaranteeing two 50-basis-point increments in the next two ECB meetings. Failure for that to materialize will later put downward pressure on Euro; we shall see., because otherwise, the shared currency may be heading toward multi-year highs.
CAD ⇑
The Canadian Dollar is up against the buck after the Bank of Canada’s decision announcement. As expected, the BOC hiked by another 25bps but said that at 4.5%, this may be the terminal point for their benchmark interest rate. The end of the tightening cycle seems to be taken more as a sign of faith in economic restrengthening while it adds to traders’ and investors’ desires to see a more accommodative financial environment. If others follow and speak of belief in growth, the buck will be subdued
