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The German ZEW economic confidence index edged lower to -41.0 for April from -39.3 previously, but above consensus forecasts of -48.0. The current conditions index dipped to -30.8 from -21.4, but also above market expectations and there were further reservations over the Euro-zone outlook.

There was no Euro support from Ukraine developments with very strong expectations that there would be a major Russian offensive on the Donbas. Russian President Putin stated that peace talks with Ukraine were at a dead-end. Germany stated that gas supplies would last until late summer if Russian supplies were cut off.

US consumer prices increased 1.2% for March which was in line with consensus forecasts. The year-on-year inflation rate increased sharply to 8.5% from 7.9% which was slightly above market expectations of 8.4% and the highest rate since the end of 1981. Energy prices surged 11.0% on the month with an annual increase of 32.0% while fuel oil increased 70% on the year. Food prices increased 1.0% on the month with an 8.8% annual increase.

Underlying prices increased 0.3% and below forecasts of 0.5% with the annual rate marginally below expectations at 6.4%. This was still an increase from 6.4% and the highest rate since August 1982. There was a 3.8% decline in the prices for used trucks on the month while apparel prices increased 0.6%.

The dollar dipped lower in an immediate response to the data with increased speculation that the inflation rate was very close to a peak.

The Euro rallied to a high just above the 1.0900 level, but failed to hold the advance and retreated steadily to lows around 1.0810 at the New York close.

Markets remained uneasy over Ukraine developments as US President Biden stated that Putin is committing genocide with only a slight Euro recovery to 1.0840.




The US NFIB small business confidence index dipped to 93.2 from 95.7 previously with a further increase in inflation pressures as the proportion of owners raising selling prices hit a record high of 72%. US Treasuries were little changed ahead of the US open on Tuesday and then rallied following the US consumer prices data.

Yields continued to decline into the European close with the 10-year yield dipping to the 2.70% level which sapped dollar support and triggered a covering of short yen positions. In this environment, the dollar dipped to test the 125.0 area with lows at 124.80 before a tentative recovery.

Fed Governor Brainard stated that reductions in the balance sheet could come as soon as June after a decision is made in May. Richmond Fed President Barkin state that rates should move rapidly to neutral and then tighten further if needed and St Louis head Bullard insisted that rates would have to move above neutral.

Japan’s Tankan manufacturing index strengthened to 11 from 8 previously and the services sector also improved, but underlying machinery orders declined sharply.

There were further warnings from Japanese finance Minister Suzuki that FX stability is important. China announced an adjustment to coronavirus lockdown policies which should ease lockdown restrictions and the dollar secured a net advance to 125.65 against the yen.




There was little sustained reaction to the UK jobs data with evidence of a tight labour market offset by evidence that the labour market was cooling. Sterling was hampered to some extent by underlying reservations over the Brexit impact with ONS data indicating that the number of UK companies exporting to the EU declining by over 30% in 2021. Sterling did find support above the 1.3000 level against the dollar and rallied to near 1.3050 as the decline in US bond yields temporarily loosening the dollar’s grip on major currencies. The news that Prime Minister Johnson had been fined for a lockdown breach did not have a significant impact, but markets will be monitoring developments closely. The Euro retreated to the 0.8325 area as the Euro remained vulnerable.

The headline UK inflation rate surged to a 30-year high of 7.0% for March from 6.2% previously and above consensus forecasts of 6.7% while the core rate increased to 5.7% from 5.2%. Market reaction was limited with Sterling trading just above the 1.3000 level as expectations of global rate hikes limited potential UK currency support.  




The franc continued to gain support on Tuesday with unease over the Ukraine situation maintaining defensive demand for the Swiss currency, especially with fears over a prolonged conflict. A dip in US yields also eroded potential selling pressure on the Swiss currency.

The Euro dipped below the 1.0100 level while the dollar was unable to make any headway. The franc remained resilient on Wednesday with further support from expectations that long-term inflation differentials would support the currency and the dollar was held around 0.9330.


Technical Levels 




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