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Post-Data Greenback Surge Moderates As Equities March Higher

FOREX
  • After treading water throughout the European session, the greenback caught a substantial bid following the slew of US economic data. Both the GDP Price index and quarterly Core PCE registered above their surveyed median estimates, prompting around a 40-pip surge for the USD index.
  • USDJPY had the most notable rally, rising from session lows around 133.25 all the way to 134.20 highs. In similar vein, EURUSD slipped briefly back below the 1.10 handle.
  • Overall, a disconnect between fixed income and equities left currency markets a little directionless throughout the rest of the US session. Significant pressure on front-end US yields (2-year +15bps) was unable to halt the strong 1.85% rally for the S&P 500 which diminished any upside momentum for the greenback.
  • The improved risk backdrop weighed on Euro crosses with the likes of EURAUD and EURNZD moderating some of their impressive strength seen throughout the week.
  • In emerging markets, it is worth noting the substantial selloff for the Colombian peso (USDCOP +2.54%) following the president’s cabinet reshuffle and the announcement of a new finance minister. This was in stark comparison to the Brazilian real which advanced 1.35% as a result of the improved global mood and domestic fiscal headwinds easing.
  • The Bank of Japan meeting will take focus overnight before a host of European growth data in the European session. In the US, attention will be on the March core PCE data, particularly of interest after today’s surprisingly strong Q1 advance release. Equally important will be the employment cost index release, followed by the MNI Chicago PMI.
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