The Dollar Gains Traction Following Strong U.S. Jobless Claims Data

The EUR/USD was nearly unchanged on Thursday hovering near support levels. European and U.S. markets will be closed on Friday in celebration of the Good Friday holiday.  A stronger than expected U.S. jobless claims were offset by an uptick in German February inflation figures.

Technicals

The EUR/USD was nearly unchanged on Thursday ahead of a long holiday weekend. The exchange rate was unable to recapture resistance near the 10-day moving average at 1.2337.  Support is seen near an upward sloping trend line that comes in near 1.2300. Prices are forming a wedge pattern as energy builds. Momentum is neutral as the MACD (moving average convergence divergence) index prints near the zero-index level with a flat trajectory on the MACD histogram which points to consolidation.  The fast stochastic generated a crossover sell signal on Wednesday, and while the trajectory is declining the rate is slowing which reflects short-term consolidation.

Jobless Claims Decline

U.S. initial jobless claims fell 12k to 215k in the week ended March 24 after rising 1k to 227k which was revised from 229k in the March 17 week. This is now the lowest level since January 1973. And it brings the 4-week moving average down to 224.5k from 225.00k which revised from 223.75k. Continuing claims rose 35k to 1,871k in the March 17 week after dropping 41k to 1,836k previously which revised from 1,828k.

German February HICP inflation rose

German February HICP inflation rose to 1.5% year over year from 1.2% year over year in the previous month. A slightly weaker than anticipated pick up in the headline rate, but that was already flagged by state numbers earlier. The preliminary breakdown for the national CPI rate showed a sharp acceleration in food price inflation, which jumped to 2.9% year over year in March from just 1.1% year over year in February. This is likely a reflection of the exceptionally long and harsh winter, but also the earlier timing of Easter this year. Services price inflation also accelerated somewhat but less so and overall the data suggests that core inflation held much steadier than the headline rate. Furthermore, the rebound in March only brought the national rate back to where it was in February, so will not necessarily add to the arguments of the hawks.

German state inflation numbers move higher in March. Annual rate across the German states that have released data so far have picked up 0.1-0.4%, but average slightly less than the 0.3% expected for the pan-German annual rate.

German jobless rate at record low

German unemployment numbers dipped a further -19K in March, more than anticipated and bringing the seasonally adjusted jobless rate to 5.3%, a new series low. ECB officials have argued that wider levels of underemployment are higher than official jobless numbers suggest but the German Labor Agency’s measures of wider underemployment also declined 22k over the month. Employment numbers, which are only available until January show a rise in the total of 762K over the year.

UK Q4 GDP was left unrevised

UK Q4 GDP was left unrevised at 0.4% quarter over quarter and 1.5% year over year in the third and final release, as had been widely anticipated. This follows growth rates of 0.5% quarter over quarter and 1.8% year over year in the previous quarter. Growth in Brexit-bound UK remains conspicuously weak relative to major peers, comparing to 2.7% growth in the Eurozone in Q4, and 2.9% in the U.S. The UK’s ONS stats office also released Q4 current account data, which showed a smaller than expected deficit of GBP 18.4 billion.

UK Gfk consumer confidence data showed an unexpected improvement

UK Gfk consumer confidence data showed an unexpected improvement to a -7 reading in the March survey after -10 in the month prior. The improved was pinned on a rise in inflation-adjusted average pay, mixed with near record levels of employment and continued low interest rates, along with relatively bright news on the Brexit front.