USD shrugs off mediocre ecostats


Even though there were no US data to speak of, and nothing new on the China trade talks, the USD did well on Monday. The two statistics that did make an appearance were ISM-NY business conditions index - two points lower at 61.1 - and construction spending, which fell 0.6% in January.

Whatever misgivings investors may have about the US economy and the dollar are eclipsed by their doubts about the opposition. US interest rates are higher than the other majors' and could make further upward progress. The American economy did grow at a much faster clip than the others in Q4.  And although it is not yet ready for the great reveal, a trade accommodation with China could be in place within a month.  


Euroland came back with a bang this morning when the services sector purchasing managers' index reading were published. Every one of them was better than forecast and above the boom/bust dividing line at 50. Italy's 50.4 and France's 50.2 were not much above it but that did not matter, as both had been expected to come in on a 49 handle.For Euroland as a whole the services PMI was 52.8, half a point ahead of forecast. Even the 0.1% quarterly contraction of Italy's gross domestic product met with investors' approval; it was better than the forecast -0.2%.

The numbers did not do the EUR much good though. It strengthened only briefly and feebly after they came out and is 0.15% lower on the day against the USD.


There were no Canadian data to confound the Loonie but investors did not need long memories to recall the disastrous GDP figure that came out on Friday. On its own that would probably have been enough to hold the CAD down. However, investors also had one eye on tomorrow's Bank of Canada monetary policy decision. They are not actively looking for a change to the 1.75% benchmark target but  it is fair to guess that if the BoC were to adjust the rate it would not take it higher.

It was another losing day for the CAD, with a decline of 0.3% against the USD. Compared with a week ago the Loonie is down by 1.0%.


Sterling lost ground for a third day, falling 0.4% against the USD.  On the face of it, and given the timing, the decline appeared to be the result of yesterday morning's disappointing construction sector PMI. However, it is rare that investors fret - or rejoice - over that statistic. It is more likely that they were finessing their positions in preparation for whatever comes next in the torturous journey towards Brexit.

Anyway, this morning's services sector PMI should have been enough to offset any negativity about the construction figure. At 51.3  the reading - which represents four fifths of the UK economy - was more than a point higher on the month and comfortably above the 50.0 forecast.


The yen is 0.1% lower against the USD. There were no economic data from Japan overnight.

It was not an entirely uneventful day for the JPY though. When the New York stock market had one of its occasional twitches yesterday it sent the DJ30 index 2% lower over the space of four hours. The ensuing nervousness took USD/JPY on an identical downward track, adding 0.2% to the yen. Both the DJ30 and the USD subsequently recovered at least some of their poise.

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