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Euro-zone ECB President Lagarde stated that policy will depend on incoming data and that it was vital to maintain operational flexibility which had little impact.

US initial jobless claims edged lower to 184,000 from 186,000 previously and slightly above consensus forecasts while continuing claims fell to 1.42mn from 1.48mn.

The Philadelphia Fed manufacturing index declined to 17.6 for April from 27.4 the previous month and below market expectations of 21.0. Production increased at a slightly faster rate on the month, but there was a slower rate of advance in new orders while unfilled orders increased more slowly. The labour market remained stronger with a faster rate of employment increase on the month. Inflation pressures remained very strong with the prices paid index increasing to 84.6 and the highest reading since June 1979.  Companies were less confident over the outlook while inflation pressures were expected to ease slightly.

The Euro-zone consumer confidence index improved to -16.9 for April from -18.7 previously, but confidence in the outlook remained fragile while Ukraine fears also sapped potential support. The Euro was unable to make further headway and overall yield spreads supported the dollar. In this environment, the Euro steadily lost ground with a retreat to below 1.0850 at the European close and posted lows around 1.0820 before a slight recovery on Friday ahead of Sunday’s French election.


 After some respite on Wednesday, US Treasures were subjected to renewed selling pressure on Thursday with the 10-year yield moving back above 2.90%. Currency markets remained very sensitive to yield considerations and higher yields strengthened the US dollar.

San Francisco Fed President Daly stated that the central bank needs to get interest rates to 2.5% by the end of the year and the central bank was likely to raise rates by 50 basis points at a couple of meetings. She added that it was an open question how far rates would need to move above 2.5%. Although she added that the central bank should not move too fast, the overall rhetoric was hawkish and markets moved to price in three successive 50 basis-point rate hikes by July.

US yields continued to move higher and the dollar secured fresh support. Fed Chair Powell stated that it is appropriate in his view to move a little more quickly on interest rates and that a 50 basis-point increase will be on the table for the May meeting. US yields surged to fresh 3-year highs around 2.97% before a limited correction

Japanese Finance Minister Suzuki held talks with US counterpart Yellen and stated that there would be close co-operation on FX rates. There was some speculation that the US would be prepared to intervene in markets which triggered a fresh element of caution over selling the Japanese currency. With equity markets on the defensive, the dollar dipped below the 128.00 level while the Chinese yuan continued to lose ground amid domestic lockdown fears.


Bank of England Monetary Policy Committee (MPC) member Mann stated that tightening now to keep inflation anchored means that less tightening is required later. She noted the risk that inflation will stay above target for longer than expected given the size of the inflation shock and a tighter monetary policy is warranted.

As far as the May decision is concerned, she stated that consumption developments and whether there is evidence of wider pricing pressures will be crucial. Overall, she was worried that weakness in consumer spending would not come quickly enough to stem price increases and increase pressure for higher rates.

Governor Bailey stated that the bank is treading a very tight line between taming inflation and heaping greater woe on the economy. According to Bailey, developments in the labour market will be crucial and whether there would be an easing of very tight conditions. Markets continue to expect a further rate hike in May.

Dollar trends tended to remain dominant and the UK currency retreated to near 1.3025 after the European close from highs near 1.3100 while the Euro edged higher.  

Consumer confidence dipped sharply in April with the second-lowest reading on record and retail sales declined 1.4% for March compared with expectations of a 0.3% decline. Confidence in the UK outlook remained notably fragile, although Sterling was able to hold just above 1.3000 against the dollar with the Euro around 0.8330.


The Swiss franc lost further ground on Thursday as global yield trends tended to dominate markets. The Euro pushed above the 1.0300 level with a peak at 1.0370 before a retreat to 1.0330 while the dollar secured a renewed advance to fresh 22-month highs just above 0.9550 before a slight correction.

Global central bank expectations remained a key driver of markets with expectations that the National Bank would lag well behind the Federal Reserve.

Despite yield conditions, fragile risk conditions limited the scope for further franc selling on Friday with the dollar around 0.9535.

Technical Levels 





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