Solid US GDP report.

According to the first reading, US GDP increased at an annualised rate of 2.9% for the fourth quarter of 2022 from 3.2% the previous quarter and above consensus forecasts of 2.6%. Consumer spending increased at a slightly slower rate of 2.2% from 2.3%.

There was a positive contribution from government spending with a technical boost from trade as imports declined, but residential investment declined again.

US initial jobless claims declined to 186,000 in the latest week from 192,000 the previous week and below consensus forecasts of 205,000. Although there was an increase in continuing claims to 1.68mn from 1.66mn previously, the data suggested a firm labour market.

The dollar index found support just above 9-month lows on Thursday and secured a limited recovery following the batch of US data releases.

Tokyo’s headline inflation rate increased to 4.4% for January from 4.0% and above expectations of 4.0% while the underlying rate increased to 4.3% and the highest rate since 1981. The data maintained expectations that the Bank of Japan would tighten monetary policy later this year which underpinned the yen.

The CBI retail sales report recorded a headline reading of -23 for January from 11 previously and well below consensus forecasts of -5. Retailers also expect sales to decline in February, but at a slower rate.

The latest US PCE prices data is due for release on Friday.

Consensus forecasts are for the core year-on-year rate to decline to 4.4% from 4.7% previously.

Chinese markets will re-open on Monday which will have a significant impact on global markets.

Tight ranges prevailed ahead of the US open with further EUR/USD resistance above 1.0900. The dollar posted net gains after the batch of US data as yields moved higher. EUR/USD retreated to lows near 1.0850 before settling around 1.0870.

The yen lost ground as US yields moved higher. After failing earlier in the session, USD/JPY held above 130.00. USD/JPY dipped to lows at 129.50 after the Tokyo inflation data before a recovery to just above 130.00.

The Swiss franc retreated from intra-day highs. EUR/CHF traded just above 1.0000 with USD/CHF recovering from 0.9160 lows to 0.9215.

Sterling was again resilient despite reservations over the UK outlook. GBP/USD failed to hold above 1.2400 and settled around 1.2370 from 1.2350.

The Australian dollar drifted lower as the US dollar retreated with AUD/USD just below 0.7100. The pair held just above 0.7100 on Friday amid hopes for a Chinese rebound. The Canadian dollar posted net gains on global recovery hopes.  USD/CAD dipped to 2-month lows near 1.3300 before a limited recovery to 1.3335.

Economic Calendar

13:30US Core PCE Price Index m/m0.3%0.2%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.