The Chinese yuan remained an important focus in Asian trading on Friday with a further slide to the 6.18 area against the dollar which maintained a very cautious tone towards risk appetite. In this context, USD/JPY retreated back below the 102 level with lows near 101.50.
EUR/USD held firm during the Asian session with only a very limited dip below the 1.37 level. The Euro was boosted initially by a much stronger than expected +2.5% reading for German retail sales which offset a sharp decline seen last month.
The Euro also pushed higher into the crucial flash CPI release with some suspicions of front-running as well as positioning. The data was slightly stronger than expected with the annual rate holding at 0.8% for February compared with expectations of 0.7%. EUR/USD jumped higher in response as retail shorts were caught on the wrong side of the market and there was a surge to highs just above the 1.3800 level. Markets assumed that the ECB would now be less willing to take any policy action at next week’s council meeting.
Month-end positioning was also an important factor helping to propel the Euro higher and there was strong support on the crosses as EUR/JPY moved above 140.50. EUR/GBP also moved above 0.8260 with month-end demand for the pair a familiar feature.
The Swiss franc continued to gain firm support during the day even with equity markets resilient. EUR/CHF was subjected to a fresh test of support in the 1.2150 area while USD/CHF slumped to test support around 0.8800 into the New York session.
Sterling gained support from a firm Nationwide house-price index gain of 0.6% for the month which gave an annual increase of 9.4%. GBP/USD surged higher in tandem with a weaker dollar and spiked above 1.6750 before retreating back to 1.6700 as Euro price action had a greater impact.
Fourth-quarter US GDP was revised down to 2.4% from 3.2% previously which was marginally below expectations, but markets had been primed for a subdued release which lessened any further dollar selling pressure, although EUR/USD did make a fresh probe on resistance levels above 1.38. Volatility remained higher as positioning continued to have an important impact during the New York session.
There was spiky Canadian dollar activity following the much weaker than expected 0.5% GDP contraction with an initial USD/CAD spike to 1.1145 reversed quickly for a decline back through 1.1100.