The greenback regained some composure against the majors on Thursday, recovering from sharp selling in recent sessions. The US economic reports were largely in line with consensus estimates ¨C with the final reading for Q4 GDP unrevised at 0.6%. Inflation also remained firm as the core PCE index eased slightly to 2.5% versus 2.7% in the previous quarter, while the headline figure slipped to 3.9% from 4.1%. Weekly jobless claims slipped to 366k down from 378k a week earlier.

The economic calendar for Friday consists of February consumption, personal income, PCE price, and the March University of Michigan consumer sentiment survey. Consumption is estimated to ease to 0.1% from 0.4% in January while personal income is seen unchanged at 0.3%. Meanwhile, the University of Michigan consumer sentiment survey is forecasted to drift to 70.0 in its final reading for March versus 70.8.

Fed speakers dominated the wires today, with Atlanta Fed President Lockhart sounding a somber tone on the current economic outlook. Lockhart said it was the US economy is in a slowdown that bears resemblance to previous episodes that resulted in recession. He suggested economic growth may not pickup in the second half as previously anticipated and that Q1 GDP will likely reveal little, if any, economic growth ¨C but it remained possible to avoid recession. Lockhart said it was important for Fed policy to ensure the slowdown is short and shallow. Further, he downplayed the prospects for stagflation while acknowledging the detrimental effects of high oil prices on inflation. Meanwhile, Minneapolis Fed President Stern echoed a similar message, saying the US economy was clearly growing little, if at all and was a bit disappointed and concerned with inflation. He also added that the Fed was still aware of its dual mandate and hasn¡¯t lost sight of inflation.

Given expectations for additional policy easing from the FOMC at its next meeting in April, the interest rate gap will continue to widen ¨C thereby weighing on the dollar in the coming months. It remains clear that the ECB will likely remain focused on its inflation mandate and leave its benchmark lending rate unchanged at 4.0% while also continuing to deliver a hawkish bias in its commentary. The outlook is less clear from the Bank of England, with the minutes from the previous meeting showing dissent of 2 board members voting in favor of a 25-basis point. Nonetheless, with the BoE¡¯s lending rate still stands 3% higher than the US, benefitting the sterling on a yield differential.

Traders will look ahead to economic data from the Eurozone and UK in the early Friday session. Data include inflation reports from the Eurozone and Germany, as well as Germany retail sales and import prices. Due out from the UK will be March house prices, Q4 GDP and Q4 current account balance.