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Euro gains after Greece’s return to bond markets


Unexpectedly good data put a break on the dollar’s decline on Thursday. The currency rose versus the pound and the yen, but weakened versus the euro, which was supported by the news of Greece’s return to financial markets. Data showed an exceptional fall in New Jobless Claims to 300k from a revised down 332k, beating expectations of a lesser fall to 320k. Moreover it was the lowest Jobless Claims figure reported for 7 years. Continuing Claims also fell to 2778k versus 2831k expected – and was considerably lower than the previous 2838k. The dollar was further supported by an higher than expected recovery in the monthly budget deficit in March, which came out at -36.9bn from -106.5bn previously, easily beating estimates which had it at around 75bn.


The euro rose on Thursday after the news that Greece had raised 3bn in financing directly from financial markets increased confidence in the stability of the euro-zone. It was the first public sale of Greek bonds for 4 years ever since Greece became exclusively reliant on bailout money from the Troika. Demand outstripped supply 6-fold at the sale in Athens which was hailed as a success, with 5-year yields falling to 4.95% – a far cry from the double figures investors demanded at the height of the sovereign debt crisis. Also today Ireland sold a further 1bn of its bonds at auction at record low yields of 2.917% from 2.967% last month – it too has only recently returned to financial markets for the first time. The news upstaged lacklustre data which showed subdued Industrial and Manufacturing Production in France and Italy – and below-forecast CPI in France, in March. The ECB’s Bulletin reiterated the central banks message but with slightly more emphasis on its readiness to act should circumstances deteriorate.


The pound fell against most counterparts on Thursday after the BOE rate decision resulted in no change in policy, as expected, whilst Governor Carney’s cautious monetary policy vision, combined with a subdued inflation outlook, lessened expectations of a rate hike happening in the near future.
It is probably the case that Thursday’s poor performance may have just been a one-day aberration in sterling’s relentless up-trend. After all, the IMF’s upwardly revised forecast of 2.9% growth in the U.K in 2014, was an increase from a previous forecast of 2.5% in January, and the pound continues to benefit from solid fundamentals.


The yen rose versus most counterparts on Thursday after the Governor of the BOJ Haruhiko Kuroda said on the previous day that the labour market had improved more than expected, increasing confidence in the recovery. The yen was further supported by a rise in safety flows as a result of below-expectations Chinese export data which showed a -6.6% fall in March, undershotting a long way, forecasts of a 4.8% rise. Japanese data showed a below-expectations result for Machine Orders, which came out at -8.8% versus -3.0% previously in February, and rose 10.8% compared to 17.5% expected y/y. Other data showed foreign investors lost their appetite for Japanese stocks in the week ending Apr 4, perhaps as a result of the introduction of the sales tax hike on April 1, buying -515bn yen less then the previous week, when they bought -191bn.

Friday, 11 Apr, 2014 / 5:56

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