This morning finds European indices like the Dax down about 1.5%, US index futures for the Dow and S&P down about 0.5% and the FTSE running in the middle down about 1.0%. GBP has been the strongest currency on the day even outperforming the advancing USD, boosted by even better than expected UK retail sales excluding autos and some short covering ahead of the weekend as traders recognize Brexit uncertainty may have been overplayed this week.   

USD remains on the rebound today as Fed speakers continue to backtrack away from what had appeared to be a dovish signal in its statement and projections last week. Several Fed speakers since the meeting including Chair Yellen have suggested April as a live meeting for a rate hike but most were non-voters and not taken seriously.

This changed yesterday when St. Louis Fed President Bullard a swing voter this year who had favoured the December liftoff then switched to the dovish camp in January when oil fell and deflation fears rose swung into the hawkish camp. He indicated that if data remains strong the Fed should consider an April rate hike with the risk of the Fed falling behind the inflation curve growing again. He also indicated he thinks the Fed should have press conferences after every meeting to make then all equal and do away with member forecasts particularly the dot plot. He is speaking again this morning giving him another chance to make the hawkish case.


Crude oil has been hammered again overnight following yesterday’s a big increase in DOE inventories which confirmed the big API increase, indicating that US production still isn’t falling fast enough with demand soft as well. The oil decline has hit RUB particularly hard overnight taking it down 1.5%. CAD and NOK, are down 0.3% against USD along with a number of non-oil currencies like JPY and AUD. Gold has stabilized near $1,215 after selling off yesterday. Today natural gas inventories and the US Baker Hughes drill rig count could influence sentiment in the energy sector.

This morning brings US durable goods orders which are expected to retrench following a big rise last month. Flash US service PMI is expected to rise back above 50 and into expansion territory again. Tomorrow the second revision to US Q4 GDP isn’t expected to change. While these announcements may also influence Fed speculation through the morning, later in the day we could see some position squaring ahead of the weekend.


Corporate News

There have been no major corporate announcements in North America this morning.


Economic News

Significant announcements released overnight include:

UK retail sales                3.8% vs street 3.9%
UK retail ex auto            4.1% vs street 3.5%
Italy retail sales                (0.8%) vs previous 0.6%

NZ trade balance            $339M vs street $90M
Singapore industrial production         (4.7%) vs street (1.5%)


Upcoming significant announcements include:

8:15 am EDT        FOMC Bullard speaking

8:30 am EDT        US jobless claims            street 268K
8:30 am EDT        US durable goods orders        street (3.0%) vs previous 4.7%
8:30 am EDT        US durables ex transport        street (0.3%) vs previous 1.7%

9:45 am EDT        US Markit flash service PMI        street 51.4 vs previous 49.7
10:30 am EDT        US natural gas                street 21 BCF
11:00 am EDT        UK KC Fed                previous (12)
1:00 pm EDT        US Baker Hughes drill rig count        previous 476

11:30 am AEDT Fri    Japan consumer prices            street 0.3%
11:30 am AEDT Fri    Japan core CPI                street 0.8%

8:30 am EDT Fri     US Q4 GDP update            street 1.0% no change expected

TBA Sat        US Democratic caucus results from Alaska, Hawaii and Washington State