US Q1 GDP contraction confirmed.

The first-quarter GDP estimate was revised down to an annualised rate of -1.5% from the first estimate of -1.3% even though there was an upward revision to consumer spending.

US initial jobless claims declined to 210,000 in the latest week from 218,000 previously and slightly below consensus forecasts while continuing claims increased to 1.35mn from 1.32mn.

The US 10-year bond has settled just below 2.75% and close to 6-week lows with hopes that inflation will be brought under control and that expectations will be contained.

US equities rallied on Thursday with the latest earnings data in the retail sector providing an element of relief. The Nasdaq index also managed a significant recovery during the day with markets attempting to take a more optimistic view over the medium-term inflation outlook which could allow a Fed pause in tightening later in the year. The Nasdaq index posted a 2.7% advance on the day.

A limited shift in medium-term Fed expectations, allied with rate hikes by other global central banks and a decline in US yields, undermined potential support for the US dollar. The currency index retreated to a 1-month low just below 101.50.

Chancellor Sunak announced a total support package of £15bn to provide support to ease the cost-of-living crisis and surge in energy costs. As well as universal support measures, there will be additional support for low earners. The support for will be financed in part by a 25% tax on excess profits on the energy sector.

Fiscal support will potentially give increased scope for the Bank of England to raise interest rates further to combat inflation.

German and French holidays curbed trading volumes during Thursday’s European session. There was further uncertainty over EU policy on Russian oil imports which contributed to choppy trading. US data releases had limited impact with a further debate over the medium-term outlook.

US 10-year yields settled just below 2.75% and close to 6-week lows which limited dollar support.

The Chinese yuan was fixed sharply lower on Friday. Despite a weaker yuan, EUR/USD posted a fresh 1-month high above 1.0750 on Friday. Yen demand was stifled by gains on Wall Street. USD/JPY settled around 127.30 on Thursday before a retreat to 126.80 on Friday amid wider US losses.

The Swiss franc overall was mixed with net support from speculation over National Bank tightening. EUR/CHF was held below 1.0300 with USD/CHF at a 1-month low below 0.9600.

Sterling failed to hold initial gains with a fiscal support package priced into some extent. Sterling did move higher again on Friday with firmer equities providing net support. GBP/USD found support near 1.2550 and posted a 1-month high above 1.2650 on Friday before fading. EUR/GBP posted net gains to 0.8525 before a retreat to 0.8500.

Canadian retail sales were unchanged for March with a core increase of 2.4% for the month. Higher oil prices helped underpin the Canadian dollar.  USD/CAD dipped to 3-week lows near 1.2750 amid a weaker US dollar. AUD/USD traded below 0.7100 on Thursday, but posted a further advance to a 3-week high around 0.7140 on Friday.

Economic Calendar

13:30USD PCE Core Price Index (Y/Y)(APR)5.30%5.20%
13:30USD PCE Core Price Index(M/M)(APR)0.30%0.30%
13:30USD Goods Trade Balance(APR)-127.12B
13:30USD Personal Spending (M/M)(APR)0.70%1.10%
13:30Personal Consumption Expenditures PI (MoM)(APR 01)0.90%
13:30Personal Consumption Expenditures PI (YoY)(APR 01)6.60%
15:00USD Michigan Consumer Sentiment(APR 15)59.1059.10

*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.