North American Summary and Highlights 19 Mar
Overview - The USD was softer despite Middle East risks which eased somewhat in late trade. GBP and a lesser extent EUR were supported by central bank meetings, though USD/JPY also fell substantially.
North American session
EUR/USD and GBP/USD both picked up, with USD slippage extending in late trade after Israeli PM Netanyahu stated Iran no longer had the capacity to enrich uranium or manufacture missiles, raising hopes for an end to the war. EUR/USD saw highs above 1.16 from after a pre-ECB dip below 1.1450 while GBP/USD saw highs above 1.3450, up over two big figures from pre-BoE lows. USD/JPY fell over two big figures to near 157.50. EUR/JPY was also lower, with the slippage coming before the ECB decision.
The first round of US data was stronger, initial claims falling to 205k in the March payroll survey week rom, 213k and February’s Philly Fed manufacturing index rising to 18.1 from 16.3. However this was followed by a sharp 17.6% fall in January new home sales. Equities were under pressure and the UST curve saw a significant flattening, though these moves moderated in late trade as Middle East fears eased somewhat. USD/CAD was relatively stable, while a late AUD/USD bounce failed to hold above .71.
European session
In addition to continued tensions in the Middle East, European eyes were on central banks. First came the SNB and Riksbank, both leaving rates unchanged, with the SNB warning against risk from CHF strength and the Riksbank seeing risks on both sides from the Middle East conflict. The initial response was modest but while EUR/SEK kept to a narrow range EUR/CHF in North American trade built gains to .9130 from lows near .9070.
The BoE and ECB also left rates unchanged. The markets read the BoE as hawkish given a 9-0 vote and a reference to possible tightening, even if the statement was more balanced than hawkish. The ECB revised this year’s HICP forecast up to 2.6% from 1.9% and GDP down to 0.9% from 1.2%. Later an ECB source report suggested a rate hike could be seen between April and June. EUR/GBP slipped to .8615 from .8640 before correcting to .8625.