US GDP Eyed
Market focus will remain on the US on Friday, with the fourth quarter GDP, Michigan confidence and the quarterly Core PCE data is due. Our US economists are in line with consensus, looking for a rise to 3.0% q/q on the GDP print, a further sign of the relative out performance of the US economy. The wider driver for the dollar has of course been this week’s FOMC meeting and its effect is still being shown through USDJPY. The rally that began three days ago reversed completely overnight. Falling US Treasury yields in the aftermath of the meeting were to blame. USDJPY had been following gradually ever since, and fresh long positions put on just ahead of the meeting finally had their stops triggered overnight. Although immediate focus is in the US, the continued talks over Greek PSI and the prospect of Monday’s EU summit will likely keep investors cautious in the very near term, despite the broadly more positive risk backdrop elsewhere. US Treasury Secretary Geithner said that if Europe commits to a more effective firewall, he expects IMF economies to support those efforts, although he did not mention the US role directly. Earlier, Australia’s debt management office announced plans to issue A$700 mn of 2022 bonds on Feb 1, and another A$700 mn of 2018 paper on Feb. 3. These are the first Australian commonwealth bonds to be issued this year, and given overseas investors continue to show a keen appetite for Australian debt, we would not be surprised to see some AUD inflows on the back of this. EURUSD traded 1.3078-1.3153 and USDJPY 76.90-77.51.
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UBS Investment Bank