USD firms amidst 'prominent downside risks'

The US dollar is grinding higher against all the major G10 currencies in New York trading, despite sharply weaker than expected Q4 GDP data. The Bureau of Economic Analysis said real GDP rose 2.2% in the fourth quarter, which was below the previous reading of 2.6%. 

FX traders didn’t seem to care, in part because weather and the government shutdown may still corrupt the data. Traders bought dollars with the Japanese yen nosing out EUR and GBP as the worst-performing currencies since New York opened.

Fed vice-chair Richard Clarida reiterated the FOMC’s dovish outlook in a speech in Paris this morning. He said, "US and other financial markets are attuned to a number of prominent downside global risks, which include Brexit, a sharp slowdown in global growth prospects and trade tensions." 

He echoed concerns echoed by officials from other central banks saying that concerns about global economic and financial developments will keep the Fed “patient and data dependent."

USDJPY rallied on the back of a jump in US Treasury yields from 2.63% at the New York open to 2.393% by mid-morning. The dovish remarks from the Fed vice-chair and the jobless claims data gave a modest improvement to the risk tone. 

Brexit drama enveloped GBPUSD. The Guardian reported that British MPs would vote for a third time on Theresa May’s Brexit plan. GBPUSD selling dragged EURUSD lower as well. EURUSD broke below support at 1.1240, which opened the door to further weakness to 1.1175.

Wall Street is trading in positive territory helped by a modest improvement in the weekly jobless claims report. The ongoing US/China trade negotiations and reports that China is making concessions on some key issues may have also contributed to the mood.