FX Update: Chinese data is strong on all fronts

The main focus for the Asian session was a slew of Chinese data. In response, currency markets appeared to take risk off the table slightly with the likes of EUR and AUD easing back. Equity markets were flat.

On the growth front, China recorded 9.7% y/y growth in Q1, better than the 9.4% markets had forecast but just a tad lower than the 9.8% hit in Q4. For the March data, releases were bang in line with earlier leaked reports in Hong Kong, and all above the market’s estimates. CPI rose 5.4% y/y from 4.9% in February (though analysts had suspected a high number after the PBOC’s surprise rate hike last week), PPI also showing rising cost pressures with a 7.3% annual increase (from 7.2% in February). The manufacturing sector appears to be riding high with 14.8% annual growth (14.0% was anticipated) while retail sales also beat forecasts with 17.4% annual growth.

Heading into Europe we have Norway’s trade balance together with Eurozone CPI and trade data. Inflation is also a focus for North America with the US CPI for March scheduled to be published along with empire manufacturing, TIC flows, industrial production/capacity utilization and Michigan confidence. We can also expect speeches from Fed’s Evans and Baxter and the ECB’s Constancio.

It was a volatile session Thursday for the EUR with early rumours of Eurozone debt restructuring and defaults as the market interpreted German FinMin Schaueble’s comments yesterday. An overly long market saw stops triggered to the downside but once EU/IMF officials came out in force ruling out any debt restructuring the bounce was quite swift and took us back to starting levels. Oil and metals saw a strong rebound and this helped commodity FXers AUD and CAD sustain their rallies. The safe-haven CHF benefitted from a stronger ZEW survey. USDJPY slid below its 200-day MA but ran out of steam after BOJ’s Noda warned they are watching FX markets closely and will ask for on-going G7 cooperation.

On the US data front, jobless claims showed a surprise rise this week, hitting 412k vs. 380k expected and a revised 385k prior, while PPI data was below expectations but still higher than the previous month. All-in, the USD finished the session lower and touched 16-month lows versus the index. The final US Treasury auction of the week - $13 bln worth of 30-year notes – saw a lower bid/cover ratio of 2.83 vs. 3.02 last time, with the yield easing off to 4.531%.

Have a great weekend.

Economic Data Highlights

• US Initial Jobless Claims out at 412k vs. 380k expected and revised 385k prior
• US Continuing Claims out at 3680k vs. 3705k expected and revised 3738k prior
• US Mar. PPI out at +0.7% m/m, +5.8% y/y vs. 1.0%/6.1% expected and 1.6%/5.6% prior resp.
• US Mar. PPI ex-Food/Energy out at +0.3% m/m, +1.9% y/y vs. 0.2%/1.9% expected and 0.2%/1.8% prior resp.
• US Weekly Bbg Consumer Comfort Index out at -43.0 vs. -44.7 expected and -44.5 prior
• China Q1 Real GDP out at +9.7% y/y vs. 9.4% expected and 9.8% prior
• China Mar. CPI out at +5.4% y/y vs. 5.2% expected and 4.9% prior
• China Mar. PPI out at +7.3% y/y vs. 7.2% expected and 7.2% prior
• China Mar. Industrial Production out at +14.8% y/y vs. 14.0% expected and 14.9% prior
• China Mar. Retail Sales out at +17.4% y/y vs. 16.5% expected and 11.6% prior
• JP Feb. Industrial Production out at+1.8% m/m, +2.9% y/y vs. 0.4%/2.8% prior resp.
• JP Feb. Capacity Utilization out at +2.9% m/m vs. 3.6% prior
• SI Feb. Retail Sales out at -12.1% y/y vs. -1.5% expected and revised +3.2% prior

Upcoming Economic Calendar Highlights
(All Times GMT)

• Sweden Average House Prices (0730)
• Norway Trade Balance (0800)
• EU Euro-zone CPI (0900)
• EU Euro-zone Trade Balance (0900)
• US CPI (1230)
• US Empire Manufacturing (1230)
• US Total TIC Flows (1300)
• US Industrial Production (1315)
• US Capacity Utilization (1315)
• US Michigan Confidence (1355)
• US Fed’s Evans to speak (1400)
• US Fed’s Baxter to speak (1430)
• EU ECB’s Constancio to speak (1515)