The sentiment in financial markets has been heavily influenced by the conflict in Ukraine recently, which has turned it negative, sending safe havens higher and risk assets lower. Stock markets have turned bearish, with S&P500 losing around 700 points this year after touching 4,800 points early in January and the decline has been picking up pace, opening with a bearish gap lower today.

EUR/USD has turned quite bearihs as well, falling from close to 1.15 and now threatening the 1.11 level, which is the low from last month. Geopolitical tensions are always a strong factor deciding the sentiment, but the second US GDP report is also helping the USD. The US economy saw a decent bounce in Q4 after the slow-down in Q3.

This second reading revised the GDP higher to 7.0% from 6.9% previously, which is helping the USD, together with the FED turning quite hawkish, while the European Central Bank remains less so. Below is the seond US GDP report for Q4 of last year, showing a visible improvement.

US Prelim Q4 2021 GDP Report

• Q4 GDP second estimate +7.0% vs +7.0% expected
• First reading Q4 GDP was +6.9%
• Final Q3 GDP 2021 reading was +2.4%
• Personal consumption +3.1% vs +3.3% prelim
• GDP price index +6.3% vs +6.4% prelim
• Core PCE +5.0% vs +4.9% prelim
• Deflator +7.2% vs +7.0% prelim
• Full report

Details:

• Core sales ex motor vehicles +6.4% vs +6.3% prelim
• Final sales +2.0% vs +1.9% prelim
• Inventories added 4.90 pp to GDP
• Business investment added 5.38 pp to GDP
• Business investment in equipment +2.4% vs +0.8% prior
• Net exports were a 0.07 pp drag on GDP
• Exports +23.6% vs +24.5% prelim
• Imports +17.6% vs +17.5% prelim
• Home investment +1.0% vs -0.8% prelim

The inflation numbers are continued to ratchet higher but overall the market has much more to worry about now than what was happening 2-5 months ago in the US economy.

EUR/USD Live Chart