The Dollar Continues to Soften Following Solid Chinese GDP

The dollar continues to trade under pressure, led by USD/JPY, which is down for the fifth day out of the last six trading days. The pair logged a fresh four-month low at 108.13 during a thin Asian session, following the stronger than expected Chinese GDP data. All the main European centers are closed today for Easter Monday, and a number of Asia-Pacific centers were also out in observance of the holiday. EUR/USD and most other dollar pairings have been relatively stable, while the narrow USD index is showing modest declines, at 100.26, but remaining comfortably above the near three-week low seen on Friday at 99.93.

News that the EU will refuse to commence trade negotiations with the UK until after Brexit divorce terms have been agreed on hasn’t gone down well for the UK government, nor has the EU’s announcement that it will relocate London-based banking and medicine agencies. Tensions remain high on the Korean peninsula. U.S. VP Pence is currently in Seoul.

Chinese GDP Was Stronger than Expected

Chinese GDP increased by 6.9% in Q1 per official statistics, which was more than expected, as government spending on infrastructure, and a robust housing market boosted growth.  Analysts had expected the economy to expand at a 6.8% rate in Q1, unchanged from Q4. Q1 growth was the fastest pace since Q3 of 2015. The government is targeting a growth rate of approximately 6.5% in 2017 which is lower than the 6.5%-7% range expected by the government in 2016.

The latest round of French opinion polls still suggests that Macron and Le Pen will emerge as the front runners in Sunday’s first round of the French Presidential Election and thus face each other in a direct contest on May 7, which Macron is set to win by a wide margin. An Ifop-Fiducia poll from April 11-14 has Macron at 22.5%, Le Pen at 23%, a BVA poll from April 12-14, Macron at 23% and Le Pen at 22%. However, the latest polls also confirm the left-wing EU-critic Melenchon is a very close third and in the event could still throw a spanner in the works. If he, rather than Macron has to take on Le Pen in the second round of the contest voters will only have a choice between two EU -critics from the extreme ends of the political spectrum, leaving middle of the road voters without much of a choice and European markets open to a tense couple of weeks before the second round.