FX news and analysis 12th Apr

USD

 The dollar fell on Thursday after risk appetite rose on the back of better-than-expected Chinese data which showed a rise in country’s trade surplus and much stronger than expected export figures. The positive print helped dispel overly pessimistic expectations although it was still not as good as previous data and overall China does still appear to be slowing down. The dollar was also pressured from data from home showing that the number of Americans out of work rose in the run up to Easter when it had been expected to decline. Following on from the poor NFPs last Friday the data further weighed on the dollar as QE3 hopes resurfaced. The number of new Jobless in the week ending Apr 7 rose to 380k when a fall to 355k had been estimated – the starting figure was 367k. Meanwhile Continuing Claims actually rose to 3251k when a lesser fall to 3335k had been expected. Other data showed a doveish fall in the Producer Price Index (YoY) (Mar) 2.8% when a more muted fall to 3.1% had been expected from a previous figure of 3.3%; although Ex Food and Energy showed a rise of 1 basis point above the consensus. Finally the U.S Trade Balance showed a shrinking deficit after a -$46.0bn print in Feb when a -$51.7bn print had been expected and previous figure had been -53.5bn.

EUR

There was a slight rebound in risk appetite on Thursday which helped propel the euro back up to the top of its consolidation range, caused partly by better than expected Chinese data which reassured investors that slow-down fears were overdone. China Trade Balance came in at 5.35bn in March vs -3.15bn expected and -31.5bn previous. Exports were also slightly better at 8.9% compared to 7.0% expected and Imports fell to 5.3% from 9.0% expected. The results were still lower than previously and symptomatic of a global shift but not as bad as had been thought. On the home front Italian bond sales showed a continued rise in borrowing costs with 3-yr debt up to 3.89% from 2.76% previously whilst demand was good. Overall the higher yield didn’t impact on the euro as the new development may now already be priced in. On the data front German Trade Balance continued to show a widening surplus, which reached 14.7bn vs 12bn expected. The single currency may also have been helped by the rise in German exports by 1.6% vs -1.2% expected and 3.4% previously.

GBP

 The pound rose on Thursday as safe-haven demand for the currency and a recovery in global risk appetite both contributed to keeping it well bid. The robustness of U.K gilts at a time when most E.U countries are seeing the risk premium on their debt rise has helped sterling despite economic headwinds and a ball-and-chain of its own home-grown debt. Recent data has further helped the country’s safe image as it showed an easing in the fall in house prices and a pep-up for retail sales after figures released by the British Retail Consortium (BRC) on Tuesday evening showed them rising. Today’s data actually disappointed but such was the faith in the pound, it failed to dent investor enthusiasm. The Trade Deficit increased more than expected to £-8.77bn when a £-7.65bn had been expected which was slightly higher than the £-7.88bn noted in the previous month of February. Trade Balance Non-EU showed an even more marked deficit of £-5.02bn when £-3.83bn had been expected instead. This would have been expected to undermine the pound as it showed a fall in exports to nations outside the E.U which the government has been encouraging to reduce the dependency on the crisis prone E.U, but the pound shrugged off the negative news and rose nevertheless.

JPY

The yen weakened overall as risk appetite improved following better than expected data from China and expectations of ECB support for crippled euro-zone periphery. Data from the previous evening showed a healthy rise in the Domestic Corporate Goods Index MoM (Mar), which increased to 0.6% from 0.4% expected and 0.2% previous; YoY the same rise of 0.6% was reported. Other data showed a rise in Money Stock, which increased by 3.0% YoY when 2.8% had been expected and M3 increased by 2.6% when 2.5% had been expected in March. The increase in Money Supply would be expected to filter through to growth over coming months. BOJ commentary was particularly doveish which may have weighed on the yen. Particularly poor earnings results by Sony and Sharp on Tuesday may have spurred the BOJ into action as well as the increase euro-zone debt jitters of last fortnight. BOJ’s Shirakawa reemphasized his commitment to meeting the inflation target of 1% by any means and the expectation is that the BOJ will increase quantitative easing at its next meeting in April, perhaps by as much as 5tr yen.