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German industrial production increased 0.2% for February and slightly above market expectations, although there was a downward revision for January. Euro-zone retail sales increased 0.2% in February with a year-on-year increase of 5.0% from 8.4% previously.  The data had little market impact, but Euro developments remained important. There was an element of caution ahead of Sunday’s French Presidential election with opinion polls indicating only a narrow lead for President Macron.

The Euro was initially able to resist further selling and was able to secure a limited recovery, especially on the crosses.

There was some reluctance to sell the Euro ahead of next week’s ECB council meeting, especially with the central bank under pressure to adopt a more hawkish policy stance to counter the inflation threat. According to minutes from the March meeting, a large number of members considered that the inflation pressures demanded immediate further steps towards monetary policy normalisation, although with clear divisions within the committee.

US initial jobless claims declined to 166,000 in the latest week and well below consensus forecasts of 200,000. The data for the previous week was revised sharply downward to 171,000 from the originally reported figure of 202,000. Continuing claims, however, increased to 1.52mn from a revised 1.51mn with the previous week’s figure revised sharply higher. Although there appeared to be significant distortions in the data, the evidence sill indicated a tight labour market.  

There were further concerns over a prolonged conflict in Ukraine as Russia continued to build-up forces near the Eastern border in preparation for an onslaught on the Donbas. In this environment, the Euro drifted lower again with a retreat back below the 1.0900 level. Overall yield spreads also continued to move in the dollar’s favour which underpinned the US currency. The Euro edged lower again on Friday with a move to near 1.0850 and the dollar index posted a fresh 22-month high.




St Louis Fed President Bullard stated that a Fed funds rate of around 3.5% is needed to fight inflation and that even with financial conditions tightening the central bank remains behind the curve. He was also concerned over how the US would meet labour demand given a lack of supply.

After some respite on Wednesday, US Treasuries were back on the defensive on Thursday with the 10-year yield increasing to 2.65% as markets continued to fret over underlying inflation pressures. Wall Street equities dipped lower on rate fears, although the market was resilient and closed higher. In this context, the yen was unable to gain ground given overall yield trends with the dollar advancing to test the 124.00 level.

There was some speculation that the Bank of Japan would shift policy within the next few months given political pressure to curb the surge in energy prices.

Concerns over the Chinese coronavirus developments were again a feature, especially with reports of difficulties in the port of Shanghai which will exacerbate global supply-chain issues. The dollar peaked just above 124.20 against the yen before a limited retreat to just below 124.0 with the Euro around 134.70.




The latest ONS data indicated that consumer spending based on card-payment data was strong in the final week of March, although the data is prone to volatility.

Bank of England chief economist Pill looked at underlying questions surrounding monetary policy and doubted that quantitative easing would be a realistic policy option if inflation was too high, but there were no comments on current monetary policy with limited moves in the currency.

Sterling was unable to make any headway during the day with a more cautious tone surrounding risk appetite a key element holding back potential currency support.

Widening yield spreads relative to the US dollar also sapped support for the UK currency.

Overall, Sterling dipped to near 1.3050 against the dollar while the Euro edged lower to 0.8330.

Domestic influences remained limited on Friday with dollar strength pinning Sterling near 1.3050 while the Euro retreated to 2-week lows around 0.8310.




The franc was held in tight ranges on Thursday with a slight drift lower as global yields moved higher again. Markets also remained wary over potential National Bank intervention to curb franc gains. Underlying unease surrounding the Ukraine situation was again significant in curbing potential selling pressure on the Swiss currency. The Euro secured a limited net advance to 1.0180 with little change for the dollar. Global developments dominated on Friday with the dollar securing a limited net advance to 0.9350 while the Euro retreated to near 1.0150


Technical Levels



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