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German March unemployment increased 1,000 for March compared with consensus forecasts of 23,000, but the total will inevitably increase sharply in the near term. According to the flash data, the Euro-zone CPI inflation rate declined to 0.7% for March from 1.2% previously and below forecasts of 0.8%. The underlying rate declined to 1.0% from 1.2%. ECB council member Holzmann stated that the decision on coronabonds is up to governments, but there was no sign of a political breakthrough.
The dollar maintained a strong tone into the New York open with further demand on month-end grounds and the Euro declined to lows around 1.0925.

US consumer confidence declined sharply to 120.0 for March from 132.6 the previous month, although this was above consensus forecasts. There was a small decline in the current conditions index with a sharp decline in expectations due to the expected impact of the coronavirus outbreak.

The Chicago PMI manufacturing index declined slightly to 47.8 from 49.0 previously, but this was above consensus forecasts of 44.0. There was a notable decline in new orders and the headline figure was inflated by further delays in supplier deliveries as overall confidence in the outlook dipped.
The Federal Reserve announced the introduction of further swap lines for overseas central banks. The latest move will cover the repurchase market in order to improve the functioning of markets and lessen the risk of disorderly sales by overseas holders of US assets.

The Fed move triggered initial losses and the US retreat accelerated after the London fix with a Euro recovery to the 1.1000 area. Volatile trading continued after the European close and the single currency held above 1.1000 on Wednesday ahead of significant US data releases later in the session.


China announced that there would be further targeted cuts in reserve ratio requirements for medium and small banks. The dollar maintained a firm tone into the New York open with a peak around 108.70 but then declined sharply in US trading. With position adjustment fading, the dollar declined sharply to lows near 107.50, although there were choppy trading conditions amid month-end pressures with the yen resilient.

San Francisco Fed President Daly stated that she suspected the US was already in recession and reiterated that the central bank is prepared to do whatever it takes within its powers. Cleveland head Mester stated that an unemployment rate above 10% was feasible. US equities closed lower which limited the potential for any dollar recovery attempt and President Trump denied that he was considering removing trade tariffs.

Japanese Prime Minister Abe stated that he was not in a situation to declare an emergency now, but the government stated that the country was on the brink and the Tankan business confidence index declined to 7-year lows. Although the Chinese Caixin PMI manufacturing index strengthened to 50.1 from 40.3, risk appetite remained fragile and regional equities moved lower with the dollar registering net losses and trading near 107.35 in early Europe.


The latest UK current account data was better than expected with the deficit held to £5.6bn for the fourth quarter of 2019 from £19.9bn previously. Primarily, this reflected an erratic improvement in the trading account due to the export of precious metals and underlying concerns persisted.
There were further concerns over the UK/EU trade outlook as pressure continued for the transition period to be extended as uncertainty remained intense.

Sterling still tended to lose ground in early Europe, although there was a reversal ahead of the New York open with little evidence of month-end selling. Positioning was certainly important and tended to support the UK currency during the day. From lows below 1.2300, the UK recovered ground and gains accelerated towards the European close with a move above 1.2400. The Euro also declined to lows near 0.8810, but the UK currency dipped again after the European close as volatility increased once again. A fragile global risk environment limited Sterling support on Wednesday as it traded below 1.2400 against the dollar with the Euro above 0.8900.


The Swiss franc struggled for independent direction on Tuesday with other major market moves tending to dominate. The Euro initially remained on the defensive, but held above the 1.0550 level and recovered to the 1.0600 area amid the wider Euro recovery. The dollar pushed to highs around 0.9685 before a retreat to 0.9625. The number of domestic coronavirus cases continued to increase, but there was a slowdown in the rate of increase. The franc was able to resist selling pressure amid the weaker tone in equities despite expectations that the National Bank would continue its efforts to prevent Swiss currency gains with the dollar just above 0.9600.



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