HomeContributorsFundamental AnalysisDollar Holds Weak Amid Debt Concerns, European Stocks Extend Gains

Dollar Holds Weak Amid Debt Concerns, European Stocks Extend Gains

Here are the latest developments in global markets:

FOREX: Stronger-than-expected consumer prices on Wednesday failed to support the dollar, pushing it even lower on Thursday despite markets increasing their expectations on the number of rate hikes delivered by the Fed. Investors seem to be cautious as they worry that the US national debt could surge significantly on the face of massive tax cuts and the government’s two-year spending plan approved last week. Worse-than-expected US retail sales also dampened sentiment on consumption. Dollar/yen was last trading at 106.46, near today’s fresh 15-month low of 106.16 (-0.50%), while the dollar index stood weak at 88.72 (-0.44%). Euro/dollar managed to gain ground, rising slowly to a two-week high of 1.2509 (+0.26%), although political news out of Germany signaled yesterday that the relationship between Merkel’s Conservatives and their likely coalition partners, the SPD, might not be as harmonious as in the past. Uncertainties around the upcoming Italian elections were also weighing on the pair. Pound/dollar was getting love as well, crawling up to a 1 ½-week peak of 1.4076 (+0.46%). Dollar/loonie was flat at 1.2484.

STOCKS: European equities were broadly in the green, with the pan-European Stoxx 600 trading higher by 1.0% at 0940 GMT, recording a one-week high of 378.37, and the blue-chip Euro Stoxx 50 being up by 1.3%. The UK’s FTSE 100, German Dax and CAC 40 were up by 0.6%, 1.1%, and 1.7% respectively, with the latter leading the gains among major blue-chip European indices. Airbus (up 10.4%) was the best performing stock within the CAC 40, as well as the Stoxx 600. The airspace firm was boosted after delivering an earnings beat. Food and drink company Nestlé declined notably (down 2.3%), leading the losses in the Swiss SMI (up 0.4%), which underperformed relative to other blue-chip indices in the continent. Nestlé’s fall was spurred after it reported that last year’s organic growth was the weakest since it began recording the measure more than two decades ago. Old Mutual (up 4.8%) led gains in the FTSE 100. A large part of the bank and insurance firm’s revenues are made up in South Africa. Political developments in the country – leading to the resignation of President Jacob Zuma – have considerably boosted the rand, this being a positive for Old Mutual. Miner Anglo American (up 2.8% – also a FTSE constituent) was on the rise for similar reasons.

COMMODITIES: Oil prices remained higher on the day, despite giving up part of earlier gains. WTI and Brent crude were up by 0.6% and 0.2% respectively, trading at $60.97 and $64.47 per barrel. Gold traded higher by 0.25%, at $1,353.99 an ounce. The falling greenback is seen as supportive for these dollar-denominated commodities.

Day ahead: US initial jobless claims, PPIs & industrial production gather attention

US data will remain in the spotlight during Thursday’s European afternoon, bringing new challenges to the greenback which has been under severe pressure this week.

At 1330 GMT a bunch of data will be available out of the US for review including initial jobless claims, producer prices, the New York Fed manufacturing index and the Philadelphia Fed’s business index.

The number of people applying for unemployment benefits is expected to inch up to 230,000 in the week ending February 9 compared to 221,000 seen in the preceding week. However, the measure continues to hold below 300,000 since March 2015, flagging that the US labor market keeps operating under healthy conditions.

Th New York Fed’s Empire State manufacturing index and the Philadelphia’s Fed manufacturing index which measure business conditions in the aforementioned states are expected to stand slightly weaker in February but still remain at robust levels.

Producer prices, which might add further evidence on inflation, are projected to slow down on yearly terms in January, with the headline index anticipated to edge down by 0.1 percentage points to 2.5% y/y and the core equivalent which excludes volatile items expected to ease to 2.1% y/y. On a monthly basis though, both measures are said to post a strong rebound, rising by 0.4% and 0.2% respectively, following a pullback in December.

Later on, the readings on US industrial production will be published at 1415 GMT. Forecasts are for industrial output to rise at a slower pace in January, driving the monthly growth rate down from 0.9% to 0.2%.

Results from a housing survey conducted by the National Association of Home Builders (NAHB) will come to light a few minutes later (at 1500 GMT), probably showing no change in the outlook of US home sales in February.

Meanwhile, Canada will see the release of the ADP nonfarm employment report at 1330 GMT.

Regarding public speeches, Sabine Lautenschlager, an ECB board member, is scheduled to give a speech at Dutch Banking Day 2018 at 1200 GMT. Norway’s central bank governor, Oystein Olsen, will be giving a keynote speech at 1700 GMT. Lastly, Bank of Canada Deputy Governor Lawrence Schembri will be talking at 1830 GMT.

In equities, companies releasing quarterly results will be attracting attention.

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