Equity markets remained a significant focus on Friday following the sharp 3% Nasdaq decline seen Thursday. The Nikkei index retreated to six-month lows which maintained underlying reservations over yen selling as bearish media speculation surrounding stocks flared once again. USD/JPY did find support below the 101.50 level on longer-term bullish expectations.
EUR/USD maintained a robust tone and extended its gains to five successive sessions with an attempt to break above the 1.39 level. Bears were finally able to stem the advance and the pair edged back to the 1.3880 level during the European session. The Australian dollar struggled for support under the weight of sliding equities as AUD/USD retreated to lows near 0.9360.
There was some evidence of a flight to quality during the European session as German benchmark 10-year yields declined to below the 1.50 level for the first time in 10 months and there was also a move lower in benchmark US Treasury yields. In this environment, there was some demand for both the dollar and Euro which limited moves for EUR/USD.
The US producer prices data was stronger than expected with a 0.5% monthly increase and core 0.6% gain, both of which were substantially above the consensus forecasts. At the margin, the data should dampen expectations of inflation being too low and the dollar gained some degree of support following the data.
The University of Michigan consumer confidence also increased to 82.6 for April from 80.0 which was the highest reading since July and should offer some further reassurance surrounding the labour market and consumer spending.
Comments from central bank officials will be watched very closely over the weekend with G20 meetings and Spring gathering of the IMF in Washington. Both the Federal Reserve and ECB will remain an important focus given uncertainties surrounding their monetary responses.
EUR/USD dipped to lows below 1.3870, but bears were still unable to make any significant impression during the session despite the generally favourable US data releases. USD/JPY was able to find support at lower levels and AUD/USD was able to regain the 0.94 level.
Sterling continued to under-perform during the day with GBP/USD lows close to 1.6720 while EUR/GBP also moved higher to challenge resistance levels above 0.83 as technical plays dominated UK price action.