In the commodities complex, Oil prices continued to clear out offers, refreshing YTD highs of US$67.01 in recent trading. The bid came on the heels of US President Donald Trump’s warning to Iran that it has 10 to 15 days to reach a nuclear deal, or ‘really bad things’ will happen. The US is assembling two aircraft carriers, fighter jets, and refuelling tankers in the region.
Elsewhere, the USD index modestly extended on its recent rebound, pencilling in a fourth consecutive day in the green, adding 0.1%. Yesterday’s US weekly jobless filings (week ending 14 February) came in lower than expected at 206,000, down from an upwardly revised 229,000 figure the week prior. This reinforces a broader picture of labour market resilience, as January’s US jobs report showed the economy adding 130,000 new payrolls and the jobless rate ticking lower to 4.3%. Alongside the recent hawkish Fed minutes and increasing geopolitical risks, this has provided USD bulls with some impetus.
Busy Data Docket Ahead
We have a busy calendar ahead, centred mainly on US metrics. At 1:30 pm GMT, the BEA will publish the US Q4 25 GDP first estimate and the December PCE price index numbers.
GDP is expected to show the economy grew by an annualised rate of 3.0%, which, although this would mark a deceleration from Q3’s 4.4% print, is still considered healthy growth; the GDP deflator is projected to cool to 2.9% from 3.7%. An in-line outcome today would likely reaffirm the Fed’s wait-and-see stance and bolster the USD. However, a miss could underpin recessionary fears, likely weighing on the buck.
Growth data will be viewed alongside the Fed’s preferred inflation gauge: the PCE price index. Headline YY PCE data is forecast to remain unchanged at 2.8%, while MM is forecast to modestly accelerate to 0.3% from 0.2% in November. On the core front, YY data is expected to increase by 2.9% from 2.8%, with MM also anticipated to tick higher by 0.3% from 0.2%.
Ultimately, any upside surprise in the PCE data would help bolster the Fed’s current stance, particularly after the Fed minutes. This would naturally underpin a USD bid. Softer inflation, on the other hand, would likely have the opposite effect.
