Key US consumer prices data Wednesday.

The Euro-Zone Sentix investor confidence index improved to –8.7 for April from –11.1 previously and slightly stronger than consensus forecasts of -9.9. According to Sentix, the major upheavals feared as a result of the gas and electricity price crisis in Europe failed to materialise this winter, but it reiterated that there was no reason to sound the all clear.

Chinese new loans increased CNY3890bn for March after a CNY1810bn increase the previous month and well above consensus forecasts of CNY330bn. Overall total social financing also increased CNY5380bn for the month from CNY3160bn and also well above expectations. The data will maintain expectations of a strong rebound in the Chinese economy which also helped support risk appetite.

New York Fed President Williams stated that inflation is still way above the 2% goal. According to Williams, there has been no movement in core inflation outside the housing sector which makes the job difficult. He did add that monetary policy is somewhat restrictive now while there has been some slowing in labour demand but it is still strong. He did, however, add that the Fed will have to lower interest rates if inflation falls.

The Treasury announced that Megan Greene would be appointed to replace Tenreyo on the Monetary Policy Committee from July. Her recent public comments indicated that she would be a centrist or relatively hawkish member on the committee and certainty more hawkish that Tenreyro.

The latest US consumer prices data will be important for the Federal Reserve and markets on Wednesday.

Consensus forecasts are for the headline inflation rate to decline sharply to 5.2% from 6.0% with favourable base effects having an important impact in cutting the rate.

Core prices are forecast to increase 0.4% on the month with the annual rate edging higher to 5.6% from 5.5%.

The Bank of Canada will announce its latest policy decision on Wednesday. Markets expect that the central bank will maintain rates at 4.50%, but warn that it is prepared to hike rates further if necessary. The bank will also release its latest Monetary Policy Report.

The Euro posted further limited gains after Tuesday’s European open. The dollar also regained some territory later in the day. EUR/USD peaked close to 1.0930 before drifting lower. The dollar drifted lower on Wednesday with EUR/USD close to 1.0930.

Higher US yields undermined the yen. USD/JPY peaked near 133.75 in Europe with further gains to highs just above 134.00 before settling around 133.75.

A sharp decline in Swiss sight deposits underpinned the Swiss franc. EUR/CHF dipped to near 0.9850 before stabilising with sharp USD/CHF losses to 0.9030.

Sterling posted gains after the European open as recession fears eased, but failed to hold intra-day highs. GBP/USD hit 1.2455 before drifting lower and traded close to 1.2435 on Wednesday.

The Australian dollar drifted lower but remained in positive territory on the day with AUD/USD around 0.6650 on firm Chinese data. AUD/USD edged higher to 0.6670. The Canadian dollar was underpinned by gains in oil prices. USD/CAD retreated to near 1.3450 ahead of the BoC rate decision.

Economic Calendar

13:30CPI y/y5.1%6.0%
14:00BOE Gov Bailey Speaks
19:00FOMC Meeting Minutes
20:15BOE Gov Bailey Speaks

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