North American Summary and Highlights 11 April

North American session

US data was mixed, March PPI was weaker than expected at -0.4%, -0.1% ex food and energy, but the preliminary April Michigan CSI plunged to 50.8 from 57.0. Inflation expectations surged, the 1-year view to 6.7%, the highest since 1981, and the 5-10 year view to 4.4%, the highest since 1991. Fed talk remained mostly hawkish. The data was not a major factor for the markets.  

Early weakness in equities and gains in long-term UST yields gave way to a corrective rise in equities and a corrective flattening in bonds. USD/JPY rose to 144 from 142. EUR/USD fell from highs above 1.14 to lows below 1.13 before a modest late correction higher. EUR/GBP had little direction but EUR/CHF was lower. USD/CAD was quiet but AUD/USD saw some late gains to reach .63.  

European morning session 

The USD continued to decline across the board through the European morning, with the JPY, EUR and CHF continuing to be the main beneficiaries. EUR/USD gained more than a big figure to 1.1385, and USD/JPY fell 1.5 big figures to 142.50. USD/CHF fell from 0.8250 and bottomed out at 0.8110 before recovering to 0.82.  

The FX moves were correlated to equity market performance. S&P futures and European equities started the session slightly firmer but fell back through the morning, with the USD and the riskier currencies falling with equities, although there has been some recovery in both towards the end of the morning.  

Early in the session, GBP gained a modest boost from stronger than expected February GDP data, which showed a 0.5% m/m gain against a market consensus of a 0.1% rise, with manufacturing output particularly strong. EUR/GBP initially dropped around 20 pips to 0.8660, but resumed its gains as equities fell back, topping out at 0.8735 before dropping back to near opening levels by the end of the morning.