The Dollar is up for the third consecutive session (for the first time in nearly three weeks) and its negative correlation with the S&P 500, which has been robust throughout the past 12 months, has broken down for the second consecutive session. The S&P 500 is indeed up about 1.7% at time of writing, having rallied 1.6% yesterday. Domestic factors have seemingly weighed on major currencies whilst at the same time not negatively impacting global risk sentiment.
Eurozone GDP growth slowed sharply in Q4 to -0.7% qoq (based on the preliminary flash estimate) from a record 12.4% qoq in Q3. This compares poorly with the United States which recorded growth of about 1% qoq in Q4. The EUR/USD cross is now threatening to fall below 1.20 for the first time since early December. This in turn pushed GBP/EUR to a new 8 month high seeing the rate trade in the mid-high 1.13s.
The Reserve Bank of Australia kept its policy rate unchanged at 0.10% at its overnight meeting, in line with expectations, but increased its QE program by a further AUD 100bn. Moreover the RBA indicated that policy rates may not rise before 2024, which may have weighed on the Australian Dollar. The AUD/USD cross is down more than 0.4% from yesterday’s close and trading at a five week low.
