By: Saxo Bank
The dollar continued to slide on Friday though a last minute deal on the U.S. budget preventing a U.S. government shutdown slowed the fall. Earlier, EURUSD was encouraged through 1.44 as Spain’s economics minister said a bailout was out of the question, while ECB’s Bonello commented that last Thursday’s rate hike would not make a great difference to Portugal. There was also talk that higher crude prices were leading to some petro-states recycling some of their USD income into EURs. GBP firmed as U.K. PPI came in dramatically above forecast (not what the Bank of England wants to hear) but gains were curtailed as a U.K. bank scaled back rate hike expectations.
For the North American session, eyes were all on budget negotiations and data releases were only second tier so relative yields played a large part in cementing direction. For the record, U.S. wholesale inventories came in as expected, up 1.0% and unchanged from a revised previous figure. Wall St finished the week on a soft note resulting in an almost flat performance on the week. Canada’s employment data was mixed with a drop in unemployment mostly as a result of a fall in the participation rate while headline employment change looked on the soft side but masked a strong increase in full-time jobs.
It is a slow start to the week on the data front in Asia and the session was spent consolidating the gains made against the U.S. dollar on Friday. News that the U.S. government narrowly avoided a shutdown had little noticeable effect. In weekend events, we have seen an escalation in tensions in the Middle East with protestors killed in Yemen, Syria and Egypt but the only impact was felt in oil markets.
China released trade data for March during the weekend and printed a small trade surplus, +$0.14 bln, which was a big surprise considering consensus was for a deficit of $3.35 bln. While March data shows a strong rebound from February’s $7.3 bln deficit, it still meant that in Q1 China recorded its first quarterly deficit in 7 years (-$1.02 bln). Has it helped global imbalances?
The European session is also relatively mundane on the data front with CPI data from Denmark and Norway and industrial production from France and Italy featured. There are no data releases for North America but we have speeches from the Federal Reserve’s Dudley and Yellen and the European Central Bank’s Weber.