The latest Chinese GDP data registered the weakest rate of expansion for 18 months at 7.4% for the first quarter. There was some relief that the data was not even worse and there was no significant damage to global risk appetite. Ukraine tensions were a significant background factor, but the direct impact was limited at this stage. With the Nikkei index moving higher, USD/USD was able to break above the 102.0 level.
GBP/USD traded with a very firm tone in to the UK unemployment release, underpinned by a combination of front-running and expectations of strong data. A break above the 1.6750 resistance area also triggered stop-loss momentum.
In the event, the data was stronger than expected with a further 30,000 dip in the claimant count while the unemployment rate fell sharply to 6.9% from 7.2%. This pushed unemployment below the Bank of England’s 7.0% threshold and there was also a marginal increase in real incomes for the first time in five years which boosted confidence in the growth outlook. GBP/USD spiked higher to an immediate peak above 1.6800 and challenged 2014 highs as EUR/GBP dipped below 0.8250.
EUR/USD took advantage of the ability to hold support in the 1.3800 area and pushed higher to challenge the 1.3850 area early in Europe. March Euro-zone inflation was confirmed at 0.5% with a slightly lower than expected core reading of 0.7% which maintained overall pressure on the ECB, but the immediate currency impact was limited.
The US housing data was slightly weaker than expected despite a recovery in starts to 0.95mn for March from 0.92mn previously. The dollar did prove to be resilient following the data and received a boost from stronger than expected industrial production data with a monthly 0.7% increase after a sharply upwardly-revised 1.2% advance the previous month.
EUR/USD dipped to the 1.3815 area, but bears were again unable to penetrate any significant support levels which triggered an inevitable round of short covering as traders waited for any fresh comments from Fed Chair Yellen. USD/JPY advanced to highs just above 102.30 as US yield support held intact.
There were no surprises from the Bank of Canada interest decision with interest rates held at 1.0%. The bank is expecting inflation to reach the target 2% level in the first quarter of 2015 from the fourth quarter previously, but the statement still referenced important downside inflation risks. After an initial dip lower to 1.0960, USD/CAD recovered the 1.10 level in choppy conditions.