EUR / USD
Euro-Zone industrial sentiment declined to -2.6 for April from -0.5 previously, but there was a recovery in the services sector for the month. The overall business and consumer survey increased marginally to 99.3 from 99.2 previously, but slightly lower than market expectations of 99.9.
The Euro was unable to make any headway into the US open with narrow ranges prevailing as markets monitored risk conditions.
The US GDP increased at an annualised rate of 1.1% for the first quarter of 2023 from 2.6% previously and below consensus forecasts of 2.0%. There was a strong increase in consumers spending of 3.7% from 1.0% previously, but this was offset by a dip in housing investment and a sharp decline in inventories for the quarter.
The PCE prices index increased 4.2% from 3.7% previously while the core PCE prices index increased to 4.9% from 4.4% and above expectations of 4.7%.
Although the headline reading was weaker than expected, the robust increase in consumer sending provided support and the stronger than expected inflation reading reinforced expectations that the Federal Reserve would increase interest rates next month.
Fed Funds rate futures indicated that the chances of a rate hike to 5.25% were close to 85% from near 70% earlier in the day.
In this environment, the dollar posted net gains and the Euro dipped sharply to lows just below the 1.1000 level before a recovery to 1.1030 as risk appetite improved.
The dollar secured a net advance on Friday and the Euro traded just above the 1.1000 level ahead of the US PCE prices data later in the day.
The dollar lost ground into the US open on Thursday with a retreat to around 133.40 against the yen.
US Initial jobless claims declined to 230,000 in the latest week from 246,000 previously and below market expectations of 248,000 while continuing claims held at 1.86mn. The data provided some relief over claims trends after the notable increase last week.
The Kansas City Fed manufacturing index dipped sharply to –21 for April from 3 previously with the non-manufacturing index also in contraction.
Pending home sales declined 5.2% for March after a 0.8% increase the previous month.
Treasuries lost ground after the US GDP prices data with the 10-year yield increasing to around 3.50% and the dollar posted a strong advance to highs near 134.20.
Equities posted further strong gains into the New York close, but the dollar edged below the 134.00 level.
Japan’s Tokyo headline inflation rate held at 3.5% and above expectations of 3.1%. The Bank of Japan made no changes to monetary policy with the bank still aiming to hold the 10-year bond yield around 0.0% with a 0.5% cap. There was a slight shift in forward guidance, but the review on monetary policy is scheduled to take 12-18 months, dampening expectations of any near-term move to tighten monetary policy which undermined the Japanese currency.
The yen posted sharp losses after the data with the dollar strengthening to near 135.00 with the Euro just above 148.50,
There were again no significant domestic Sterling drivers during Thursday with risk conditions and global currency moves tending to dominate.
US equities were able to make significant headway which helped underpin risk appetite, although the FTSE 100 index traded lower on the day.
Sterling was unable to make a fresh challenge on the 1.2500 level against the dollar but held firm around 1.2470 at the European close and edged towards 1.2500 later in US trading as equities posted strong gains. The Euro retreated to post a net loss to just below 0.8830 from early highs at 0.8875.
The Lloyds business barometer index edged higher to an 11-month high for April and Sterling overall held steady on Friday with strong expectations of a May Bank of England rate hike. The UK currency was held below 1.2500 against the firmer dollar while the Euro was little changed. There will be position adjustment ahead of the long weekend which could lead to choppy trading with overall risk conditions also important for the currency.
The Swiss franc lost ground on Thursday with a slightly steadier tone surrounding risk appetite and higher US yields. The Euro settled near 0.9870 from 0.9880 highs while the dollar was able to make a net advance to just above 0.8955 and further away from 26-month lows recorded on Wednesday.
The franc was able to resist further selling pressure on Friday with the dollar trading just below 0.8950.