North American Summary and Highlights 29 Feb

North American session

European currencies lost ground through the North American session. EUR/USD dipped back to see lows below 1.08, dropping around 40 pips, while USD/JPY was net little changed near 150 having dropped around 80 pips to 149.20 early in the session. The USD initially fell back across the board after a modest rise in jobless claims data helped to push yields lower, but recovered by the end of the session. The jobless claims was released at the same time as a 0.4% rise in core PCE prices, which while significantly firmer than recent trend was on consensus. A 0.2% rise in personal spending was also on consensus and while a 1.0% rise in personal income was stronger than expected, disposable income was restrained to a 0.3% increase by higher tax payments.

The USD fell against the CAD from near 1.36 to below 1.3550 after modestly better than expected Canadian GDP data but corrected over half of the move late in the session. Canada’s Q4 GDP increase of 1.0% annualized was stronger than expected, and Q3 was revised up to -0.5% from -1.1%, meaning the drop has been more than fully reversed. However the details of the Q4 data fail to impress, with a decline in domestic demand and a weaker than expected unchanged outcome for December, though preliminary signals for January are positive. 

European morning session

The USD and the EUR were both generally firmer through the European morning, USD/JPY recovered back above 150 after selling off in the Asian session, and AUD/USD fell back below 0.65 from an open near 0.6520. But EUR/USD was little changed near 1.0835, after making some gains early in the session, with the EUR also making gains on the crosses against GBP, CHF and scandis.

European inflation data during the morning was broadly in line with expectations. The French HICP was slightly higher than expected at 3.1% y/y, but Spanish HICP was in line at 2.9% y/y, and German national HICP fell to 2.7% in January from 3.1% in line with consensus. Other data included German retail sales, which were weaker than expected in January but saw some upward revisions to November that suggested the underlying trend is weak but steady. Swedish Q4 GDP was weaker than expected at -0.1% q/q, but Q3 was revised up to -0.1% from -0.3%, while Swiss GDP was stronger than expected at 0.3% q/q in Q4. UK money and credit data was mixed, with M4 weaker than expected, falling 0.1% m/m, with mortgage lending also falling again, while consumer credit and mortgage approvals were both stronger than expected.