The dollar and euro fell sharply to preferred safe-haven currencies, as traders continued to pull back from riskier positions in the wake of surging crude oil and growing Middle East violence. Attention is still firmly focussed on the developments in Libya and the oil-rich region. Developments are, of course, firstly captured by the oil price. Brent oil spiked to about 120 USD/barrel on rumours of widespread disruptions, but later on there was a partial unwinding, helped by messages that Saudi Arabia would raise its production to compensate for the shortfall expected from Libyan oil production.
Yesterday's economic data from the US revealed that ex transportation Durable Goods Orders plummeted in January and New Home Sales fell more than the market anticipated. Improved Jobless Claims also surprised the markets showing a lower than expected figure but failed to support the dollar. Rising oil prices appear to weigh on the dollar as it is consider negative for the US economy and global growth.
Sterling was under pressure yesterday as falling risk appetite dragged it lower, although strong expectations that the Bank of England will raise interest rates in coming months was seen providing support. It was further hurt by a survey showing that British retails sales growth slowed more than expected in February although firms ramped up prices at their fastest in 20 years.
So far today we have had UK Q4 GDP revised down to -0.6% q/q, +1.5% y/y which was the biggest quarter to quarter fall since Q2 back in 2009. The Office for National Statistics said the downward revision due to lower production, service output along with the adverse weather conditions which are blame for the 0.6% drop from quarterly GDP. This has placed increased pressure on the pound and now sits at 1.6075 against the USD and 1.1661 against the EUR.
As for the rest of the day, the economic market calendar contains the second estimate the US fourth quarter GDP, the euro zone M3 money supply and credit growth data, first estimate of German CPI inflation (February) and final figure of Michigan consumer confidence. Italy will tap the market and also central bankers remain active today.
Report by Currencies Direct
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