Lee Hardman, Currency Analyst of economic data at MUFG, suggests that the US dollar is starting the week on stronger footing following the release late last week of a package of stronger than expected US economic data.
“It was revealed that personal spending rebounded more strongly than expected in January following a weak end to last year. Both personal economic data spending and income increased solidly by 0.5% in January reinforcing expectations that personal consumption will rebound in Q1 after moderating to an expansion of 2.0% annualized in Q4 compared to the average annualized rate of 2.6% in 2015. Economic growth in Q4 was revised marginally higher to an annualized rate of 1.0% driven by smaller drags from inventories and net trade. However, the smaller inventory drag will act as dampener on growth in Q1. More notable was the sharp acceleration in the Fed’s preferred measure of inflation which repeated the upward surprise which evident in the CPI report.