The EUR/USD, too was range bound for most of the night as data from the Eurozone was strictly second tier. The EZ eco news showed somewhat muted inflation in France (0.3% vs. 0.5% expected) and a narrowing, though still rather material, Trade deficit in Italy. Trade deficit of course was the order of the day yesterday when US numbers printed better than expected as the gap narrowed by 4.1%. Given the news, the price action in the EUR/USD was all the more impressive as the pair first responded by selling off but then quickly recovered the 1.2100 figure and traded above that level since. The market reaction indicates that traders may have dismissed the improvement in February's numbers, due to the fact that oil prices and bi-lateral trade with China both increased significantly in March.
Today's Advanced Retail Sales remains the last major event risk of the week. A positive number may help the dollar bulls push the pair below the 1.2100 barrier once again, but only a very strong result is likely to keep the EUR/USD pinned below those levels for the rest of the week. Focus will soon turn to Monday's TICs report which could show the third consecutive month of foreign capital inflows failing to offset the Trade deficit gap. Worries about the structural problems of the US Balance sheet may weigh on the pair as FX dealing slows to a crawl heading into the holiday.
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Euro, Yen Quiet in Pre-Holiday Trade
- Thursday, April 13 - 2006 at 15:15
With Passover tonight and Good Friday a day away, the FX market remained quiet in pre-holiday trade as both economic news and order flows were decidedly absent. In Japan, the Domestic Capital Goods Price Index failed to increase in March, but yearly figures showed a jump of 2.7% as fuel and commodity prices continued to rise. Japanese corporate prices have remained neutral or positive for the past 9 months, although today's downward surprise of no gain versus a 0.2% expected increase suggests that price inflation remains contained, possibly delaying any tightening action from the Bank of Japan until much later in the year. As a result trading in USD/JPY was nearly still bound with the pair moving in a 20 point range for most of Asian and European sessions.
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Boris Schlossberg, Senior Currency Strategist, Daily FXThursday, April 13 - 2006 at 15:15 UAE local time (GMT+4)
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