The U.S. is flat across the board, except for some weakness against the safe-haven Japanese yen. However, there are many risk events on today’s docket that is likely to spark some volatility. The second reading of fourth quarter gross domestic product showed that the U.S. economy grew at an unrevised 1.9% pace. Personal consumption jumped to 3.0%, up from a 2.5% initial reading. The jump in household purchases was offset by slower investment by businesses. The greenback has traded slightly weaker in the minutes following the data.
There are also three Federal Reserve members speaking this afternoon. Harker will speak in Philadelphia at 3 p.m. EST and Williams will speak in Santa Cruz at 3:30 p.m. St. Louis Fed President James Bullard will speak in Washington at 6:40 p.m. Odds of a March interest rate hike have popped higher over the last few days. Fed Funds show a 50.0% chance of a Fed hike, up from about 40% on Friday. With a split between expectations, about half of market participants will be proved incorrect which will surely lead to wild swing in the currency markets following the interest rate decision on March 15th.
In the near term, focus will shift to President Trump’s speech to a joint session of Congress. Investors are early awaiting details to presidents “phenomenal” plan to cut taxes.
The Japanese yen was the biggest winner overnight, gaining against most of its major counterparts. International equity markets were mostly quiet overnight, with the MSCI AC Asia Pacific Index currently 0.2% lower. European stocks and America futures are unchanged. Therefore, the recent yen strength can be attributed to the uncertainty of tonight’s speech by President Trump and end-of-month flows.
The Euro held a familiar range against the greenback as French political uncertainty looks to take a short-term backseat to developments in the United States. The Greek financial crisis as returned to the headlines as the European Union and International Monetary Fund officials meet and debate further austerity measures for the beleaguered country.
The economic docket showed that French consumer inflation was broadly weaker than expected. However, fourth quarter GDP rose 0.4% over quarter three, meeting expectations.