North American Summary and Highlights 14 March
Overview - The main story of the day was a rise in EUR/USD as Germany reached agreement on the debt package. This supported equities despite the Michigan CSI slipping on a surge in inflation expectations.
North American session
The only significant data release showed a sharp decline in the preliminary March Michigan CSI, to 57.9 from 64.7, with the 5-10 year inflation expectation surging to 3.9%, its highest since 1993, from 3.5%. Despite the startling data the FX response was limited, and equities enjoyed a significant bounce.
Equity gains lifted the commodity currencies, AUD/USD to .6325 from around .63, while USD/CAD fell to 1.4375 from 1.4425. EUR/USD slipped back below 1.09 but sustained the bulk of its European gains. USD/JPY was marginally lower around 148.55 after peaking at 149. Long-term USD yields slipped on growth concerns despite a spike at the front end on Michigan CSI inflation expectations.
European morning session
EUR/USD gained half a figure late in the European morning on news that the German government collation had reached agreement with the Greens on the debt package, allowing the fiscal boost from defence and infrastructure spending to be passed. The EUR is generally stronger, with GBP, JPY and CHF only marginally higher against the USD, although the scandis have broadly moved with the EUR.
Otherwise, the session was generally quiet. GBP saw some early weakness after January GDP data came in weaker than expected at -0.1% m/m due to a 0.9% decline in production. However, GBP losses were modest, with EUR/GBP only gaining around 10 pips. The German political agreement has added around 25pips to those initial gains to take EUR/GBP to 0.8420.