US growth beats expectations


Until the Bureau of Economic Affairs printed the revised data for fourth quarter gross domestic product the USD was not looking too clever. The failure of Trump's trip to Hanoi and the allegations being thrown around by Michael Cohen were providing a less than ideal background to the currency.

However, when it was announced that the US economy expanded at an annualized pace of 2.6% in the fourth quarter, more than the expected 2.3%, the USD took off. Never mind that it was a slower expansion than in Q3, or than the data are at least two months old, with US growth running at three times the pace of Euroland and Britain the numbers looked good. The USD was one of the day's top performers.


The ecostats from the euro zone were adequate. Germany and Euroland reported provisional inflation rates of 1.7% and 1.5%. Some of the national manufacturing purchasing managers index readings beat forecast and one - from French manufacturers - was actually higher on the month at 51.5. But the 47.7, 47.6 and 49.3 from Italy, Germany and pan-Euroland indicated contraction. The highlight, surprisingly, came from Germany: retail sales enjoyed a strong 3.3% rebound in January, mirroring the November-December-January pattern seen elsewhere.

The EUR had little else to say for itself. It is 0.3% lower on the day against the USD.


Thursday's economic data were of little help to the CAD. Canada's current account deficit widened to $15.5 billion in the fourth quarter of 2018, a bigger gap than expected. A $7.3 billion fall in exports was attributable mainly to lower energy prices: oil prices fell 37% in Q4. Other figures yesterday showed factory gate prices and manufacturers' costs diverging.  The raw materials price index increased 3.8% in January while the industrial product price index fell 0.3%.

WTI crude was up by 1.5% on the day, doing much to offset the disappointing economic data. There was also some help from optimistic rumours about an imminent trade deal between Washington and Beijing. It was enough to take the CAD 0.2% higher against the USD.


It did not come as a complete surprise that sterling had to hand back some of the gains it had won earlier in the week. The GBP is 0.4% lower on the day against the USD, though still 1.7% above its position a week ago.  

This morning's figures were vaguely interesting but not really relevant. Personal loans were steady in January. Consumer credit and mortgage approvals both beat forecast. The manufacturing sector PMI was half a point lower on the month and in line with forecast at 52.0. Sterling's only problem was a lack of new and supportive Brexit narrative. The resignation of a Brexiteer junior government minister created hardly a ripple: George Eustice was unheard-of outside Westminster.


Another busy day for the Japanese statisticians provided investors with numbers for Tokyo consumer prices, employment and consumer confidence as well as the Nikkei manufacturing PMI. Headline inflation in Tokyo accelerated from 0.4% to 0.6%. Unemployment ticked up to 2.5% and the jobs/applicants ratio was steady at 1.63. Consumer confidence faded half a point to 41.5. The manufacturing PMI was higher on the month and above forecast at 48.9, though still below 50 and therefore indicating contraction.

Investors seemed not to be impressed by the inflation and jobs data: the JPY moved lower after they came out. The other numbers had little obvious impact. The JPY is lower on the day but not particularly as a result of the Japanese data.  It is down by 1.0% against the USD.

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