US GDP data Thursday.

The German IFO business confidence index strengthened to 90.2 for January from 88.6 the previous month and in line with consensus forecasts. There was an unexpected small decline in the current conditions assessment, but this was offset by a significant improvement in the expectations index.

The IFO stated that the German economy is starting the New Year with more confidence.

ECB council member Nagel stated that interest rates need to increase further and would not be surprised if hikes continued to rise further after March.

Fellow member Makhlouf stated that rates needed to increase at the February and March meetings.

The Bank of Canada increased interest rates to 4.50% from 4.25% at the latest policy meeting which was in line with consensus forecasts.

The bank also signalled that rates were now on hold amid expectations that inflation has peaked.

The pause was condition on the economy performing in line with updated expectations.

The dollar rallied at times on Wednesday, but was unable to hold the gains amid speculation that the Federal Reserve would adopt a less hawkish stance.

The relative under-performance for Wall Street stocks also curbed underlying support for the US currency.

The dollar index was close to 9-month lows on Thursday, but found support on a dip t this area.

The first estimate of US fourth-quarter GDP will be released on Thursday.

Consensus forecasts are for annualised growth of 2.6%. Weak data would trigger fresh recession speculation.

Hong Kong markets re-opened on Thursday, but Chinese markets will remain closed for the remainder of the week for the lunar new-year holidays.

The Euro failed to draw support from the German IFO data with some disappointment over a weaker current assessment. Lower bond yields sapped dollar support ahead of the New York open. The dollar also dipped after the Bank of Canada policy decision. EUR/USD found support above 1.0850 and rallied back above 1.0900. EUR/USD challenged 9-month highs on Thursday, but failed to break higher.

The yen gained support when US yields declined. USD/JPY was unable to hold above 130.00 and dipped to lows near 129.00 on Thursday before rallying to 129.70.

The Swiss franc resisted further selling on Thursday. EUR/CHF settled around 1.0020 with USD/CHF dipping to 0.9175.

Sterling managed to regain some ground later in the day on relative monetary policy expectations. GBP/USD found support below 1.2300 and traded just above 1.2400 on Thursday.

The Canadian dollar dipped after the Bank of Canada policy decision, but recovered from intra-day lows. USD/CAD settled around 1.3390 from 1.3425 highs.  The Australian dollar rallied from intra-day lows and AUD/USD posted net gains to 0.7120 on Thursday.

Economic Calendar