North American Summary and Highlights 16 Feb

North American session

The USD rose across the board after the stronger than expected PPI data for January, though by the end of the session the move was largely reversed, with the USD ending little changed. PPI was considerably stronger than expected at 0.5% m/m core, and the US money market has further reduced expectations of Fed easing to just three cuts this year with the first not fully priced in until July. Initially, the USD saw the largest gains against the EUR and AUD, but for the moment EUR/USD remains in the 1.07-1.08 range that has held since the employment report, while AUD eventually outperformed. 

Housing data released with the PPI showed starts down sharply but this was probably due to weather with permits little changed. The Michigan CSI saw only a marginal ruse to follow two straight strong gains. Fed’s Daly said three rate cuts was reasonable for 2024,

European morning session

GBP initially recovered some of the ground lost in the last couple of days after the release of the stronger than expected 3.4% rise in retail sales in January, reversing the 3.3% decline seen in December. But the GBP rally as short-lived no doubt because while the data was stronger than expected, the volatility of the last couple of months says more about weather and seasonal adjustment than underlying trends, and EUR/GBP settled back at opening levels near 0.8550. 

Otherwise there was a mild risk positive bias with EUR/USD and AUD/USD gaining around 0.1% and USD/JPY also up around 0.1%. This took EUR/JPY up to its highest for a month just below the January 19 high, which was itself the highest since November. Scandis were also firm, with both EUR/SEK and EUR/NOK dropping around 3 figures, but without any obvious trigger, with Swedish January unemployment data in line with consensus at a seasonally adjusted 8.2%.