Risk appetite strengthens.

The German consumer prices inflation rate declined sharply to 7.4% for March from 8.7% previously which was primarily due to favourable base effects after the jump in prices last year and the figure was slightly above consensus forecasts of 7.3% for the month.

US initial jobless claims increased to 198,000 in the latest week from 191,000 previously and slightly above consensus forecasts of 196,000 while continuing claims were unchanged at 1.69mn which suggested little net change in labour-market conditions.

China’s manufacturing PMI edged lower to 51.9 for March from 52.6, but above expectations of 51.5. The non-manufacturing index posted a strong gain to 58.2 from 56.3. This was well above expectations of 54.3 and the highest reading since 2011.

Overall risk conditions were form on Thursday with reduced concerns surrounding the banking sector. The Chinese PMI data also helped underpin confidence in Asia on Friday with further gains in equities.

Risk sensitive currencies posted net gains while the yen lost ground. The dollar was mixed but with net losses while it managed to hold just above 8-week lows.

The latest Euro-Zone inflation data is due on Friday. Consensus forecasts are for the headline rate to decline sharply to 7.1% from 8.5% due to a favourable base effect, but with a marginal increase in the core rate to 5.7% from 5.6%. The data will be important for ECB policy expectations.

The latest US PCE prices data is also due on Friday with expectations that the core annual rate will hold at 4.7%. A lower reading would provide relief while strong data would complicate the Fed task.

There will be potentially choppy trading on Friday, especially around the London fix with month-end position adjustment.

The Euro held a firm tone during Thursday with further expectations of a hawkish ECB policy stance. The dollar was unable to secure significant support during the day. EUR/USD secured further gains to 1.0925 before a limited correction and settled just below 1.0900 on Friday.

The yen initially lost ground but recovered later on Thursday with little net change in US yields. USD/JPY posted gains to highs just below 133.00 before a retreat to 132.40. There was further choppy trading on Friday with USD/JPY highs at 133.50 before a retreat to 132.85.

The Swiss franc overall was held in tight ranges. EUR/CHF settled around 0.9965 with USD/CHF sliding to 0.9140.

Sterling was resilient as firm risk conditions provided significant support. GBP/USD posted 8-week highs around 1.2420 before trading back below 1.2400 after weaker than expected UK housing data.

The Australian dollar struggled to take advantage of stronger risk conditions and a fragile US dollar. AUD/USD settled just above 0.6700 and gains to 0.6735 on Friday after the Chinese data were also faded. USD/CAD retreated to lows at 1.3510 before settling around 1.3530.

Economic Calendar