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Euro-zone industrial confidence dipped to 10.4 for March from 14.1 previously, but there was an improvement in the services sector to 14.4 from 12.9 and both figures were above market expectations. There was, however, a net dip in business confidence for the month amid underlying economic pressures.

ECB President Lagarde stated that APP bond buying will conclude in the third quarter if incoming data supports the inflation outlook. She was also optimistic that food and energy prices should stop rising which should help the Euro-zone avoid stagflation within the Euro-zone economy.

There was more hawkish rhetoric from council member Holzmann that raising rates would still mean that the bank is slightly behind the curve rather than ahead of it.

The rhetoric from Russia surrounding Ukraine was less positive with comments from the Kremlin that there was nothing very promising in peace talks and that there is still much work to be done. There was, however, relief that the Kremlin also stated that it will not immediately demand that buyers pay for gas exports in roubles.

German consumer prices surged 2.5% for March with the year-on-year increase jumping to 7.3% from 5.1% and substantially above market expectations of 6.3%. This was also the highest headline rate since the first quarter of 1974.

The much stronger than expected data will cause major alarm within the Bundesbank and reinforced expectations that the ECB would have to adopt a more hawkish policy stance and look to raise interest rates. German 2-year yields moved above zero for the first time since 2014 which had a significant impact.

In this environment, the Euro maintained a firm tone and strengthened to 3-week highs around 1.1185 against the dollar.

Markets will be wary over month-end position adjustment during Thursday. Oil prices dipped sharply on Thursday which helped underpin the Euro and it traded above 1.1150 despite reservations over the Ukraine situation with a mixed performance for the US dollar as the trade-weighted index drifted lower.




US ADP employment data recorded an increase in private payrolls of 455,000 for March from a revised 486,000 in February and close to consensus forecasts.

The 10-year bond yield moved higher at Wednesday’s New York open with a move to 2.43%, but Treasuries quickly found fresh support with the yield retreating to near 2.35%. In contrast to recent sessions, relatively narrow ranges prevailed in Europe with the dollar fading from highs around 122.25. 

Richmond Fed President Barkin stated that there was still excess demand for labour and that the Fed will make a call on whether a 50 basis-point hike in rates is needed based on the strength of the economy and inflation. Markets will continue to monitor Fed comments closely.

China’s PMI manufacturing index edged lower to 49.5 for March from 50.2 with a sharper move into contraction for the services sector to 48.4 from 51.6.

Japan’s Cabinet Secretary Matsuno stated that forex moves are being watched closely. The dollar advance to 122.25 against the yen before dipping back below 122.00.




In comments on Wednesday, Bank of England Deputy Governor Broadbent stated that the appropriate path of interest rates is necessarily unpredictable given the unexpected shocks to the economy.  Broadbent noted the very difficult combination of even higher inflation, but weaker demand. Overall, Broadbent was reluctant to make any commentary on the outlook for interest rates. Overall Sterling sentiment remained generally cautious due to concerns over the economic outlook. There were also expectations that the Bank of England would be more cautious in raising interest rates and overall yields moved against the UK currency.

Sterling was able to secure a net advance against the weaker dollar, but faded from intra-day highs above 1.3150 and the Euro posted a further limited net advance.

The Lloyds Bank business survey recorded a sharp decline in business confidence and overall currency sentiment remained fragile. Sterling traded around 1.3130 against the dollar on Thursday with some support on dips and the Euro moved above the 0.8500 level for the first time in over three months.




The Swiss KOF business confidence index dipped to 99.7 for March from a revised 105.3 previously and below consensus forecasts of 100.8. The Credit Suisse investor confidence index retreated sharply to -27.8 from 9.0 in February.

The franc maintained a firm tone during the day with no further optimism over the Ukraine peace process. The Euro drifted towards the 1.0300 level while the dollar dipped sharply to lows around 0.9220. The franc edged lower on Thursday with the dollar securing a limited net advance to 0.9240.


Technical Levels 



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