Pressure Reduced On USD

CSS Daily FX Update and Outlook for 16th February 2014

Update:

US Dollar Index (-0.15%)

• Last week finished with a reduced level of pressure on the USD, but still saw fresh intraday highs established in EUR/USD. With what had been a comparatively busy week already on the economic schedule, with Fed Chairwoman Yellen testifying, the Bank of England releasing their new look quarterly inflation report and comments made to Reuters from ECB’s Coeure, Friday ended the week with European growth data and American industrial production numbers.
• As mentioned above, EUR/USD made another push higher on Friday, extending the weekly high to 1.3715. During the morning session, there was better than expected news from Europe, with Germany and France narrowly beating quarterly growth forecasts, coupled with Italy and Spain reporting in line with consensus. This helped the overall GDP for the Eurozone come in at 0.3% for Q4, above calls for a 0.2% expansion during that period. This news supports the recent uptrend in European economic data and suggests that the European economies are perhaps moving away from such stagnant prosperity levels. In the afternoon session, the US failed to inspire the financial markets quite as much; industrial production contracted by 0.3% in January, rounding off what had already been a poor reporting week for America. Obviously a continuous trend of underperforming US economic indicators does suggest a more dampened timeframe for Federal Reserve stimulus tapering and the culmination of less positive data is clearly taking its toll.
• Elsewhere the AUD once again recovered, rising back above 0.9000 towards 0.9040. Stronger Chinese trade data earlier in the week lent firm support to the AUD, only for those gains to be reversed after disappointing Australian jobs numbers. China once again provided a helping hand to the AUD on Friday, reporting another rise in CPI. This could just be another unfounded AUD/USD rally to sell into.
• Monday should provide very little impetus in our opinion and with it, a distinct lack of price action. With America on holiday on Monday, one probably has to wait till early Tuesday, with the RBA policy meeting minutes holding some interest.