Dollar Bounce Survives Weak GDP Print

With the Federal Reserve confirming its outlook by maintaining it will remain “data dependent” and wait for inflation expectations to be firmly anchored before raising rates, weakening economic fundamentals are raising the stakes for the Central Bank. Poor fourth quarter GDP performance and mixed housing data failed to dent the rebound in the US dollar with strong employment data leading the charge. Equities were mostly unmoved by the worse than expected GDP numbers and revision lower in first quarter expectations, with the bigger move felt in precious metals and energy. Boosted by a weak dollar earlier in the week, gold fell below the key $1200 level while crude retreated back below $50 per barrel despite threats of a ground invasion of Yemen. So far, Saudi Arabia has stuck Houthi forces loyal to Iran with airstrikes in conjunction with Qatar, Bahrain, Kuwait, and the United Arab Emirates.

News out over the weekend pointed to continued wrangling over Greece as Europe looks more poised than ever to let the country run out of cash and fail. Reform proposals presented over the weekend for a revised bailout failed to impress creditors, raising the stakes for today’s final submission. Greece is stuck in a difficult decision as it must find the funds to satisfy approaching repayment obligations. The remaining options to find cash include not paying public salaries and pensions, but this is likely to risk backlash from the populace already unhappy with the political u-turn made by the Syriza party. The Europe Commission might be attempting to extract every single concession possible by letting Greece edge towards the brink of failure, but this could equally backfire on the Euro Area as any failure is likely to hurt the credibility of the monetary union.