Euro sunk by German manufacturing


More of the same for the USD left it ghosting through the day in the middle of a tightly-packed field with nothing to lift or lower its spirits. It was not the only currency in the same boat: Except for the EUR only 0.4% separated the top-performing JPY from the last-placed CHF.

The most interesting US economic statistic - in a dull bunch - was the narrowing trade deficit. Not only was it the smallest shortfall since June last year, it showed a 28% decrease in the deficit with China as exports increased and imports fell. A 0.2% rise in wholesale inventories went unnoticed, as did the "slight to moderate" growth reported in the Fed's Beige Book economic snapshot. 


It was all going swimmingly for the EUR until the provisional purchasing managers' indices came out this morning. When London opened the single currency was unchanged on the day against the USD.

That fell apart when France and Germany both reported sub-50 PMI readings for the manufacturing sector. France's 49.6 only just missed the mark but the 44.5 from Germany provided further confirmation that all is not well in Europe's manufacturing hub. New export orders "fell at the second-fastest rate  in the  past ten years". The news went down badly with investors and they knocked a quick half-cent off the euro's value against the USD. Its net loss for the day is 0.5%.


Almost a week's worth of Canadian data arrived all at once, with February's trade figures and the consumer price index number for March. Investors' initial reaction was to mark up the CAD by more than half a cent, but they quickly realized that nothing else was moving and within two hours it was back where it had started. The CAD is 0.3% lower on the day, apparently because of doubts that the inflation pick-up can be sustained.

Headline inflation came in on target at 1.9%, up from February's 1.5%, with the Bank of Canada's benchmark "core rate" rising from 1.5% to 1.6%. A narrowing of Canada's trade deficit to $2.9 billion received a less warm reception. Imports and exports both declined and non-energy exports were "unambiguously weak".


Sterling's supporters would argue that the GBP was treated unfairly this morning. As investors marked down the EUR following Germany's disappointing manufacturing PMI the GBP was dragged down behind it, as if by a sinking ship. The UK retail sales data an hour or so later went some way to rectifying the injustice but the pound is still 0.2% lower on the day.

Those UK retail sales data were really quite respectable, and much better than forecast. Sales in March were up by 1.1% compared with February and 1.2% higher excluding fuel and energy. Annual increases were 6.7% and 6.2% respectively. It seems to have helped that warm weather in March contrasted sharply with the bitter cold that kept shoppers at home in the same month last year.


For the second time this week the JPY led the field. In common with most other major currencies it did not go far, rising by an almost unnoticeable 0.1% against the USD, but when nothing is moving a win is a win.

This morning's Japanese economic statistics showed weekly net inflows of foreign investment, both in equities and bonds. The JPY moved higher after the data were published, though it was not necessarily a case of cause and effect.

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