EUR / USD
Euro-Zone GDP increased 0.1% for the first quarter of 2023 and slightly below consensus forecasts of 0.2% with the year-on-year increase held to 1.3% from 1.8% and marginally below expectations of 1.4% with little net impact.
German consumer prices increased 0.4% for April with a slowdown in the annual rate to 7.2% from 7.4% and slightly below expectations of 7.3%.
The Euro overall was unable to make any impression and drifted lower into Friday’s New York open.
The US PCE prices index increased 0.1% for March compared with consensus forecasts of 0.3% with the annual increase declining sharply to 4.2% from 5.1%. Core prices, however, increased 0.3% on the month with the annual increase slowing only marginally to 4.6% from 4.7% and above market expectations of 4.5%.
The employment cost index increased 1.2% for the first quarter from 1.1% previously with a limited slowdown in the annual increase to 4.8% from 5.1%.
The dollar posted gains in an immediate response to the data with Euro lows just below 1.0965. The US currency was unable to hold the gains with month-end position adjustment having a significant impact towards the European close. There was choppy trading with the Euro recovering to the 1.1030 area.
Over the weekend, the FDIC took control of First Republic Bank as deposit outflows continued. The FDIC then held an auction and announced Just after Monday’s European open that the assets had been sold to JP Morgan. The move provided some relief for markets.
The dollar overall posted gains, especially after the stronger than expected US data and the Euro dipped to lows around 1.0965 with Chinese data curbing Euro support.
Narrow ranges prevailed on Tuesday with the Euro around 1.0985 ahead of the Federal Reserve and ECB policy meetings this week.
The yen remained under sustained pressure on Friday with the Bank of Japan decision to maintain the very expansionary policy continuing to sap underlying support.
The Chicago PMI index strengthened to 48.6 for April from 43.8 and above consensus forecasts of 43.5 but in contraction territory for the 8th successive month.
US Treasuries were resilient after the data releases and posted net gains with the 10-year yield below 3.45%. The yen, however, remained under pressure, especially equities able to post net gains. The dollar strengthening sharply to highs just above 136.50 against the yen while the Ero also jumped to 12-year highs above 150.00.
The US ISM manufacturing index edged higher to 47.1 for April from 46.3 previously and slightly above consensus forecasts of 46.8. New orders and production remained in contraction territory while there was a slight increase in employment for the month.
The prices index moved back into expansion territory for the month, reinforcing concerns that inflation pressures could be stubborn.
Markets very strongly expect a 25 basis-point Fed rate hike this week with the bank also expected to signal a pause after this hike.
US Treasuries lost ground after the data with the 10-year yield increasing to 3.55%. In this environment, the dollar posted further strong gains and strengthened to highs around 137.50. The yen remained on the defensive on Tuesday with the dollar around 137.65 and close to 4-month highs with the Euro at 15-year highs above 151.00.
There were no significant UK developments during Friday. Sterling posted strong gains during the day with net support from gains in equities. The UK currency also broke through two key technical levels which boosted sentiment and triggered further buying. There was also a significant impact from month-end position adjustment. A break above 1.2500 against the dollar underpinned confidence with a move above 1.2550 also triggering fresh 10- month highs at 1.2585.
The Euro also dipped below the 0.8800 level as Pound sentiment held firm.
UK markets were closed on Monday with Sterling retreating to just below 1.2500 against the dollar while the Euro settled just above 0.8480.
BRC data recorded an 8.8% increase in shop prices in the year to April from 8.9% previously with Sterling settling close to 1.2500 against the dollar.
The Swiss franc was resilient during Friday and resisted further losses. The Euro settled just below 0.9850 while the dollar hit highs just above 0.8975 before a retreat to 0.8935. The franc edged higher on Monday, although activity was stifled by European holidays with the dollar strengthening to 0.8965.
The franc was marginally lower on Tuesday with the dollar held around 0.8960 ahead of key central bank policy decisions this week.