USD Stronger after Q4 GDP Upward Revision

The dollar strengthened against its main rivals Friday after a stronger read on fourth-quarter economic growth was seen as emboldening those Federal Reserve policy makers who believe the group should be open to raising interest rates in March.

The dollar  traded at ¥113.39 after the data, compared with ¥112.94 late Thursday in New York. The U.S. currency strengthened against the shared currency , which fell to $1.0967 from $1.1024.

Growth in gross domestic product was marked up to 1%, up from an initial reading of 0.7%. The data were seen by some as a rebuke to bearish investors and analysts who believe the U.S. economy is headed toward recession, although others flagged the upward revision to inventories as a worry.

Jane Foley, senior currency strategist at Rabobank, said the GDP report helped alleviate concerns about the manufacturing sector. A preliminary reading on sector activity in February released earlier this week came in below expectations, but still indicated growth.

“It calms market concerns which have been shaken up in recent weeks about the slower manufacturing data released in the U.S. and concerns about how robust the U.S. economy is overall,” Foley said.

Investors are now looking ahead to a reading on consumer-price inflation due at 10 a.m. Eastern.

The Fed futures market is pricing in a 54.4% chance that the Fed will keep interest rates on hold this year, but many market strategists believe there will be at least one.

Federal Reserve policy makers on opposite sides of the issue are spelling out their views. Earlier this week, Kansas City Fed President Esther George, a leading hawk on the Fed’s rate-setting committee, said the central bank should “absolutely” consider raising interest rates in March.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza