North American Summary and Highlights 20 Feb
Overview - USD had a choppy upward path, as the details of the Q4 U.S. GDP were better than the headline number.
North American session
The USD pushed marginally lower after Friday’s U.S. economic data, but then recovered as the breakdown shows that the 1.4% number for Q4 GDP was due to a larger than expected decline in government spending caused by the shutdown. This is a temporary factor and the 2.4% real final sales for domestic purchases is more representative of the underlying trend. USD edged back up into mid-morning NY trading. Traders expect the USD to now settle down waiting for further developments on the Iran front over the weekend. A surprise early attack would probably help the USD initially.
European morning session
In Europe, the JPY sold off in early trading, with no major news and traders saying that the break of 155.00 on USD/JPY has encouraged USD bulls to push further. However, trading then settled down waiting for Friday U.S. data. The FX market is also watching events around Iran and U.S. threats to attack by early March, but FX traders feel that this is typical Trump administration pressure and even if any attack is seen it would likely be limited and short in duration. Much better than expected UK retail sales data failed to lift GBP on the crosses, as the market feels a high risk still exists of a March rate cut.