Euro-zone inflation data due on Friday with forecasts for another strong increase in the headline rate to 6.7% from 5.9%.
The rhetoric from Russia surrounding Ukraine remained generally less positive on Thursday with further evidence that Russian forces were being redeployed rather than withdrawn. There were further expectations that Russia would tighten its grip on the South and East which would increase the risk of longer-term stalemate. A humanitarian convoy was unable to reach Mariupol.
The main economic focus was on Russian demands that Western countries pay for gas supplies in Roubles from April 1st. The Kremlin plans suggested there would be no net change with Euro-zone end-users still able to pay in Euros, but uncertainty remained high.
There was choppy trading surrounding the end of the first quarter and the end of the Japanese fiscal year. Global equity markets overall moved lower while US bond yields also retreated. The yen posted net gains while the Euro was unable to hold gains after briefly jumping ahead of the London fix.
US bond yields moved higher again on Friday and the yen was subjected to renewed selling. Investment flows at the start of the new quarter will also be important.
The latest Euro-zone inflation data is due on Friday with consensus forecasts for another strong increase in the headline rate to 6.7% from 5.9% with the core rate expected to increase to 3.1% from 2.7%. A higher-than-expected rate would increase pressure for the ECB to take decisive action on monetary policy.
The latest US employment report is also due on Friday. Consensus forecasts are for an increase in non-farm payrolls of just below 500,000 with a small decline in the unemployment rate to 3.7% and 0.4% increase in hourly earnings.
Stronger than expected data, especially on wages, would reinforce strong expectations of a 0.50% rate hike at May’s Fed meeting.
Weak data would trigger a dip in expectations, but potentially represent only a temporary move.
Oil prices remained on the defensive on Thursday as President Biden confirmed a substantial release of US strategic reserves. The US will release 1.0mn barrels per day for the next six months in an attempt to cap prices.
Global benchmarks tested weekly lows with only a limited correction with markets continuing to monitor the outlook for Russian exports. The IEA will hold an emergency meeting to discuss the release of reserves on Friday.
The Norwegian central bank announced on Thursday that it will sell NOK2bn per day during April.
The increase in energy prices has boosted oil revenue and means that the flow of income is more than enough to cover the budget deficit and the bank will sell excess funds.
The selling will be an underlying drag on the currency and the krone dipped sharply on Thursday.
Ukraine military developments had only a limited market impact during the day, but underlying unease over the outlook and uncertainty over Russian energy exports hampered the Euro. The Euro briefly posted sharp gains into the fix, but quickly lost ground again. EUR/USD retreated below the 1.1100 level and traded around 1.1060 on Friday.
Longer-term US bond yields edged lower on Thursday but increased again on Friday. There was further very choppy yen trading during the day. USD/JPY dipped below 121.50 before a strong recovery to highs above 122.50 on Friday.
Sterling was resilient amid expectations of net gains during April. GBP/USD held above 1.3100 and traded around 1.3130. GBP/EUR rallied sharply to 1.1875.
The Swiss franc posted notable gains during Thursday. EUR/CHF dipped to lows around 1.0210 before a limited recovery. USD/CHF also posted net losses but recovered from 3-week lows just below 0.9200.
Commodity currencies posted net losses, especially with unease over Chinese lockdowns. AUD/USD settled around 0.7480 ahead of next week’s Reserve Bank meeting. USD/CAD was unable to hold above 1.2500 and traded just below this level.
|07:30||CHF Retail Sales (Y/Y)(FEB)||5.10%|
|07:45||France - Consumer Spending MM(FEB)||-1.50%|
|07:55||German Unemployment Change(M/M)(MAR)||-33K|
|08:55||German Unemployment Rate(M/M)(MAR)||5.10%||5.00%|
|10:00||Euro-Zone Unemployment Rate(FEB)||6.80%|
|13:30||USD PCE Core Price Index(M/M)(FEB)||0.50%|
|13:30||USD PCE Core Price Index (Y/Y)(FEB)||5.20%|
|13:30||USD Personal Income (M/M)(FEB)||-0.30%||0.40%|
|13:30||USD Personal Spending (M/M)(FEB)||1.50%||2.10%|
|13:30||CAD GDP (M/M)(FEB)||0.10%||0.60%|
|13:30||CAD GDP (Y/Y)||3.26%|
|14:45||USD Chicago PMI(MAR)||56.3|
|21:30||AUD AiG Performance of Manufacturing Index(FEB)||53.2|
|23:50||JPY Tankan Large Manufacturing Outlook||10||13|
|23:50||JPY Tankan Large Manufacturing Index||12||18|