Talking Points:

Dollar Tracks Asian Stock Indices Higher on Upbeat US Economic Data
British Pound May Come Under Pressure on Soft Construction PMI Print
Yen Likely to Outperform if Ukraine Crisis Catalyzes Further Risk Aversion

The US Dollar outperformed in overnight trade in a move that seemed to reflect Asian markets’ response to upbeat set of US economic data. January’s upbeat Personal Income and Spending figures as well as a better-than-expected February Manufacturing ISM print helped reconcile the disparity between soft US news-flow and the Federal Reserve’s commitment to “tapering” QE asset purchases on display since mid-January.

This likely reinforced expectations that Janet Yellen and company will proceed with scaling back stimulus in the months ahead. It likewise seemed to help alleviate worries about the impact of a prolonged US downturn on global demand, with the greenback’s advance tracking Japan’s Nikkei 225 and Australia’s S&P/ASX 200 benchmark stock indices upward.

UK Construction PMI data headlines the economic calendar in European hours. Expectations call a slight deceleration in the pace of sector activity growth in February after the PMI gauge hit the highest record in over five years in January. The benchmark 10-year UK bond yield has been sinking since February 12, the same day the BOE unveiled its updated guidance framework and thereby pushed back against rate hike expectations. The British Pound has held up relatively well regardless since then, but a soft turn in the economic data may direct attention to eroding policy bets and put pressure on the currency.

The ongoing crisis in the Ukraine remains a wildcard. As it stands, stock index futures are trading higher ahead of the opening bell in Europe to suggest risk appetite is on the mend after yesterday’s bloodletting. The possibility that unforeseen headline risk aggressively weighs against market sentiment is still running high however, with the Japanese Yen likely to return to the offensive if risky assets come under renewed pressure.

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