There was a generally lacklustre Tokyo session on Friday. A slightly higher reading for Japanese consumer inflation was recorded and the unemployment data was better than expected at 3.6%. In contrast, there was a much weaker than expected release for household spending which will increase unease surrounding consumer demand trends with the sales tax increase coming into force next week. USD/JPY was able to find further support on approach to the 102 level with EUR/JPY support close to 140.0.
The European session burst into life with the release of two relatively second-tier economic releases. Ahead of the national release later in the day the German state of Saxony reported that consumer prices rose 0.9% in the year to March which was lower than expected and increased speculation over a weak national figure.
There was also a weaker than expected Spanish consumer prices release with prices declining by 0.2% in the year to March. This data increased underlying market concerns surrounding the threat of deflation within the Euro-zone. In response, the Euro dipped sharply with EUR/USD sliding to three-week lows just above the 1.3700 level. There was solid support ahead of the figure with the pair able to consolidate into the US open.
The latest UK GDP data recorded no surprises with fourth-quarter expansion confirmed at 0.7%. Release on services and investment were also in line with expectations. The latest current account data was significantly worse than expected with a £22.4bn deficit for the fourth quarter from £22.8bn previously which took the annual deficit to over £70bn and 4.4% of GDP, the widest since 1989. Although GBP/USD found support just below the 1.66 level, the data overall increased doubts surrounding the sustainability of stronger growth and capped any fresh Sterling gains.
There were no surprises in the latest batch of US data releases with modest increases for personal income and spending. The headline national German CPI release was marginally weaker than expected, but the initial market assessment was that the data was not weak enough to trigger additional ECB action and EUR/USD moved back above 1.3750. USD/JPY rallied strongly to highs above 102.70 as yen buying pressure eased.
The wider picture and price action suggested a market increasingly frustrated with narrow ranges and inability to secure a breakout.