The latest Chinese trade surplus was lower than expected, but there was growth in exports and a strong reading for imports with an annual increase of 10.9%. The data, following a much weaker than expected report last month, bolstered confidence in the Chinese growth outlook and also helped boost risk appetite as commodity prices rallied. After being undermined by a weaker than expected unemployment report, the Australian dollar rallied strongly as AUD/USD regained the 0.9000 level and pushed to a high near 0.9100.
There were no surprises from the Bank of Japan as monetary policy was left on hold following the latest policy meeting. The yen maintained a strong tone during the Asian session on Thursday even though risk appetite was generally firmer. There was further speculation over capital repatriation associated with US bond payments and potential position liquidation ahead of Japanese holidays. USD/JPY dipped lower again following the inability to regain the 97 level.
The US economic data was slightly stronger than expected with a solid increase in consumer credit. Initial jobless claims edged higher to 333,000 in the latest reporting week from 328,000 previously, but this was still near the lowest levels for five years and mortgage delinquencies also fell to a five-year low.
The dollar failed to gain any benefit from the firm data and was also unable to draw any support from generally upbeat commentary from Fed officials. There was a continuing lack of liquidity as the holiday season continued to undermine participation and activity levels. The Euro was able to maintain a firm tone, supported by an absence of bad news. EUR/USD resisted any attempt on support in the 1.33 area and pushed to fresh seven-week highs just below the 1.34 level with very little selling pressure in evidence. USD/JPY also remained under pressure and tested support below the 96 level during the US session.
Sterling was much calmer on Thursday after very high volatility seen following Wednesday’s Bank of England inflation report. The general theme was consolidation with the UK currency able to resist pressure for a correction. EUR/GBP found support below 0.86 and edged higher while GBP/USD pushed higher to test resistance near 1.5550 as the dollar generally remained under pressure.