Dollar slides to 11-month lows.

US Producer prices declined 0.5% for March compared with expectations of a small increase and the sharpest decline for three years. The year-ion-year rate declined sharply to 2.7% from 4.9% previously.

Core prices declined 0.1% with the annual rate slowing to 3.4% from 4.8% previously and this was the lowest reading since April 2021.

US initial jobless claims increased to 239,000 in the latest week from 228,000 previously which was above consensus forecasts of 232,000 and the second-highest reading of the year. Continuing claims declined slightly to 1.81mn from 1.82mn the previous week.

The data reinforced expectations of a weaker economy and reduced inflation pressures. The gap between US and German yields narrowing to near 100 basis points and the narrowest gap since August 2021.

The dollar was subjected to renewed selling after the US data releases and the currency index to fresh 11-month lows during the day.

Bank of England chief economist Pill stated that high-frequency indicators suggest that momentum in wage developments appear to be easing. He added that the latest data is somewhat disappointing, but still much better than central bank forecasts from late last year.

He warned that inflation may be bumpier than expected, but still expects a sharp reduction in the second quarter, primarily due to very favourable base comparisons.

The latest US retail sales data is due for release on Friday. Consensus forecasts are for a headline and core decline of 0.4%. A weaker than expected report would reinforce market recession fears.

The Euro held a firm tone ahead of the US open with further hawkish ECB rhetoric. The dollar posted sharp losses after the latest round of US data releases. EUR/USD hit 12-month highs close to 1.1075 with only a marginal correction.

Lower US yields also helped underpin the yen. USD/JPY slumped to lows close to 132.00 after the Wall Street open. USD/JPY recovered as equities posted gains and traded around 132.50 on Friday.

The Swiss franc maintained a strong tone despite solid risk conditions.  EUR/CHF dipped to 0.9800 before a marginal recovery with USD/CHF sliding to 2-year lows at 0.8860.

Sterling was resilient despite the disappointing GDP data as equities held firm. GBP/USD posted 10-month highs around 1.2545.

Commodity currencies were boosted by a weaker dollar and stronger equities. AUD/USD posted a strong gain to 6-week highs near 0.6800 before settling around 0.6780. USD/CAD dipped to 8-week lows around 1.3320.

Economic Calendar

13:30Core Retail Sales m/m-0.4%-0.1%
13:30Retail Sales m/m-0.4%-0.4%
15:00Prelim UoM Consumer Sentiment62.062.0

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.