BoE’s Bailey offers reassurance.
US consumer confidence strengthened to 104.2 for March from a revised 103.4 the previous month and comfortably above consensus forecasts of 101.0. There was a decline in the present conditions component, but this was offset by a recovery in the expectations index.
The expectations index, however, has been below 80 for 12 of the last 13 months which is often a signal of recession within the next 12 months.
The Richmond Fed manufacturing index recovered to –5 for March from –16 previously and above market expectations of -10. Shipments moved into positive territory for the month, but new and unfilled orders continued to decline. There was a net decline in employment for the month with wage pressure easing slightly. Upward pressure on costs eased, but with a slightly faster pace of selling-price increases.
In testimony to the Treasury Select Committee, Bank of England Governor Bailey stated that the bank was in a period of very heightened tension and alertness and that the bank remained vigilant. He also added that credit conditions had tightened, but that was not a major issue at this time.
Bailey’s overall tone offered some reassurance over the UK financial sector.
Overall risk appetite has held steady over the past 24 hours with further hopes that conditions in the banking sectors have stabilised. In this environment, risk assets have maintained a more constructive tone and the yen posted sharp losses in Asia on Wednesday.
The monthly Australian data recorded a decline in inflation to 6.8% from 7.4% and below expectations of 7.1%. The core rate also edged below 7.00%. The data maintained market expectations that underlying inflation had peaked.
The latest US API inventory data recorded a 6.1mn barrel draw for the week compared with expectations of a marginal build and there was also a strong draw in gasoline.
There will be scope for corporate dollar buying on Wednesday ahead of Friday’s month end.
The Euro held a firm tone on Tuesday amid expectations of a hawkish ECB policy stance. The dollar also edged lower as risk appetite held steady. EUR/USD gradually posted net gains to highs just below 1.0850. Narrow ranges prevailed on Wednesday with EUR/USD around 1.0830.
US yields held steady, but the dollar was unable to make headway against the yen. USD/JPY was unable to hold above the 131.00 level and edged lower. USD/JPY did post strong gains to around 131.90 in Asia on Wednesday.
The Swiss franc lost ground amid expectations that the National Bank would be less aggressive on monetary policy. EUR/CHF posted a strong advance to 0.9980 with USD/CHF around 0.9210.
Sterling maintained a firm tone with Bank of England Governor Bailey’s comments offering some support. With risk conditions steady, GBP/USD advanced to highs near 1.2350.
Commodity currencies found support on dips as the US currency drifted lower. AUD/USD settled close to 0.6700 and was resilient despite the weaker than expected inflation data but retreated to 0.6675. USD/CAD dipped to lows near 1.3600 as oil prices held gains and traded just above this level on Wednesday.