Dollar slows against Europeans, firm against commodity currencies

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The Dollar remains generally firm entering the US session, although the bullish momentum wanes slightly against the European majors.
Meanwhile, weakness in commodity currencies persists, with the Aussie being the worst. The yen is mixed for now but should remain vulnerable due to the exceptional strength in benchmark global treasury yields.

Technically, the focus remains on commodity-dollar pairs first. In particular, a break of AUD/USD’s 0.7455 minor support and 1.2591 minor resistance would indicate further upside for the greenback, perhaps also due to some deterioration in market sentiment. . Meanwhile, USD/JPY may also be ready to extend the rebound from 121.27 to retest the 125.09 high. A break of this high would indicate a return to selling in the yen.

In Europe, at the time of writing, the FTSE is down -0.08%. The DAX is up 0.61%. The CAC is up 0.65%. Germany’s 10-year yield is up from 0.0489 to 0.698. Earlier in Asia, the Nikkei fell -1.69%. Hong Kong’s HSI index fell -1.23%. China Shanghai SSE fell -1.42%. The Singapore Strait fell -0.55%. Japan’s 10-year JGB yield fell from -0.0070 to 0.245.

US initial jobless claims fell to 166,000

US initial jobless claims fell -5,000 to 166,000 in the week ending April 2. The four-week moving average fell -8,000 to 170,000. Continuing claims increased by 17,000 to 1,523,000 in the week ending March 26. The four-week rolling average for continuing claims fell -25,000 to 1,541,000.

It should be noted that the methodology used to seasonally adjust the figures has been revised with this release.

ECB accounts: war only risks slowing inflation, not stagflation

Minutes of the March 9-10 ECB meeting noted that “while the Russian invasion of Ukraine had increased uncertainty surrounding the macroeconomic outlook, risks to the inflation outlook were seen as largely one-sided , experience suggesting that wars tended to be inflationary”. .

“While the war would likely affect short-term economic growth, annual growth is expected to remain positive even in the severe scenario, indicating ‘slowdown’ rather than stagflation.”

“The greater persistence of inflation has increased the likelihood of second-round effects via strengthening wage dynamics…. a longer period of above-target inflation would increase the risk of an upward unanchoring of longer-term inflation expectations.

Thus, the Governing Council could “no longer afford to ignore higher inflation, even if it was driven by an adverse supply shock”.

The ECB decided at the meeting to revise the APP net purchase plan, with the possibility of ending after June. The “easing bias” has been removed from the forecast. The rise in interest rates would be “shorter” after the end of net purchases, according to incoming data.

Eurozone retail sales rose 0.3% m/m in February, EU up 0.3% m/m

Eurozone retail sales rose 0.3% m/m in February, below expectations of 0.6% m/m. Retail trade volume increased 3.2% for motor fuels and 0.8% for non-food products, while it decreased 0.5% for food, beverages and tobacco .

EU retail sales also rose 0.3% month-on-month. Among the Member States for which data are available, the highest monthly increases in total retail trade volume were recorded in Slovenia (+8.0%), the Netherlands (+4.0%) and Portugal (+2.3%). The largest decreases were observed in Belgium (-1.8%), Estonia (-1.7%) and Poland (-1.6%).

Also released, German industrial production rose 0.2% m/m in February, above expectations of 0.0% m/m. The Swiss unemployment rate fell from 2.3% to 2.2% in March. Swiss foreign currency reserves fell from CHF 938 billion to CHF 911 billion in March.

BoJ Noguchi: Takes a long time to justify revival withdrawal

Bank of Japan board member Asahi Noguchi said while core consumer inflation could top 2% from April, it is mainly driven by external factors rather than the domestic demand. He added, “Japan does not have the kind of high inflation seen in many other countries.”

“In a country still mired in a sticky deflationary mindset, it will take a long time to steadily reach our 2% inflation target and justify a withdrawal of stimulus,” he added.

Australian services AiG fell to 56.2, intensifying price and wage pressures

Australia’s AiG Services Performance Index fell -3.8 points to 56.2 in March. Sales fell sharply from -14.9 to 53.7. Employment fell -0.3 to 54.4. But new orders rose 2.4 to 63.5. Input prices jumped from 11.5 to 77.5. Selling prices also increased from 4.2 to 64.5. Average salaries jumped from 11.8 to 67.7.

Innes Willox, chief executive of national employers’ association Ai Group, said: “Australia’s services sector continued its positive run in March, although the pace of growth slowed in the face of intensifying price pressures. inputs, difficulties in finding staff and new wage pressures”.

Also from Australia, exports of goods and services remained relatively unchanged during the month at AUD 28.8 billion in February. Imports of goods and services rose 12% month-on-month to A$41 billion. The trade surplus contracted to AUD 7.46 billion, below expectations of AUD 11.70 billion.

EUR/USD mid-day outlook

Daily Pivots: (S1) 1.0869; (P) 1.0903 (R1) 1.0932; Continued…

EUR/USD is losing some downside momentum as seen in the 4-hour MACD, but further decline is expected with minor resistance at 1.0987 intact. A deeper decline would be seen down to the 1.0805 low. The firm break will resume a larger downtrend from 1.2248. The next target is a 61.8% projection of 1.1494 to 1.0805 from 1.1184 to 1.0758, then a 100% projection at 1.0495. On the upside, minor resistance above 1.0987 will disrupt the outlook and trigger a rally.

Overall decline from 1.2348 (2021 high) is likely to continue as long as 1.1494 resistance holds. A firm break of 1.0635 (2020 low) will increase the chances of a resumption of the long-term downtrend and target a retest at 1.0339 (2017 low) thereafter. Nonetheless, the breakout of 1.1494 will keep the medium term outlook neutral and extend the term range first.

Economic Indicators Update

GMT Ccy Events Real Forecast Previous amended
22:30 USD AiG Mars Services Performance Index 56.2 60
01:30 USD Trade Balance (AUD) Feb. 7.46B 11.70B 12.89B 11.79B
05:00 JPY Leading Economic Index Feb P 110.9 103 102.5
05:45 CHF Unemployment rate March 2.20% 2.20% 2.20% 2.30%
06:00 USD Germany Industrial production M/M Feb 0.20% 0.00% 2.70%
07:00 CHF Foreign currency reserves (CHF) March 911B 938B
09:00 USD Retail sales in the euro zone M/M February 0.30% 0.60% 0.20%
11:30 a.m. USD ECB monetary policy meeting accounts
12:30 USD Initial unemployment claims (April 1) 166K 200K 202K 171K
2:30 p.m. USD Natural gas storage 18.0B 26B
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