North American Summary and Highlights 16 Apr
Overview - The USD ended mostly little changed despite a brief sharp dip on USD/JPY and a bounce on comments from Fed’s Powell.
North American session
The USD saw little reaction to US data, a sharp 14.7% fall in housing starts and an as expected 0.4% rise in industrial production, with manufacturing stronger than expected with a 0.5% increase. Comments from Fed’s Jefferson, saying rates may have to stay higher for longer, did give the USD some support. However USD/JPY suddenly saw a sharp fall from near 154.75 to near 154, which appeared to reflect market nerves rather than actual intervention, and the plunge was subsequently reversed.
USD/CAD saw a bounce above 1.38 on Canadian CPI data that saw the BoC core rates fall, despite rising to 2.9% from 2.8% as expected overall. BoC Governor Macklem later stated inflation was heading in the right direction.
Macklem was speaking with Fed’s Powell, who stated that recent inflation data showed a lack of further progress and that if inflation persisted rates could remain at the current levels as long as needed. The USD bounced on the remarks, EUR/USD testing 1.06 and GBP/USD getting close to 1.24, though the response from USD/JPY was cautious. The USD bounce was quickly reversed, which appeared to be a response to the 2yr UST yield failing to hold a break above 5%. The USD ended mostly little changed, but sustained its gains versus the CAD.
European morning session
EUR/USD and USD/JPY were both firmer through the European morning, both gaining around 20 pips. GBP kept pace with EUR gains, but commodity currencies were unchanged against the USD and the EUR gained almost 0.5% against the scandis while EUR/CHF also edged higher, breaking back above 0.97.
UK labour market data was the main data release, and was mixed, with the employment data showing some weakness but average earnings growth coming in marginally above market expectations. EUR/GBP initially rose slightly but finished the session little changed.
The German ZEW survey came in stronger than expected, hitting its highest level for economic sentiment since February 2022, although current conditions remained near the lows.