There is a mixed tone in the global capital markets today. Asian shares were mixed with declines in the Nikkei (-.07%) and Shanghai (-2.9%) being offset by modest gains elsewhere. European bourses are also mixed and the Dow Jones Stoxx 600 is off slightly.  European bonds benchmark bond yields are lower though US yields are firmer.  

The US dollar has a softer tone though its losses are largely concentrated in against the Antipodean currencies and the Canadian dollar. The New Zealand dollar’s gains are notable as the central bank left rates on hold, as widely expected, but offered a dovish bias. Firmer oil price may be a contributing factor. Reports also suggest interest in selling Swiss francs and yen for the dollar-bloc currencies.  

Sterling rallied in response; it appears, to as expected Q4 GDP.  The 0.5% expansion compares with 0.4% in Q3. Although many, like ourselves, feared the UK economy lost momentum in the second half of last year, it is not to be found in today’s report. However, we the slowing is evident is in the year-over-year pace.It slowed to 1.9% from 2.1%, the slowest pace in three years. Moreover, the growth was confined to services, with the other sectors contracting. 

Sterling’s gains today leaves it within yesterday’s ranges. In fact, if today’s high holds near $1.4345, it is the second day of lower highs. A two-week high was recorded on Tuesday just below $1.4370. The intraday technicals warn that if sterling has not peaked for the day, it has likely come very close.  

Many are still discussing the FOMC statement.  We see some observers emphasizing the sentence that read: “The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor markets and inflation, and for the balance of risks to the outlook.” Some see this as a dovish signal, arguing that the Fed has removed its previous assessment that risks to the outlook were balanced.  

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