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    Real

    Dollar gains support from better-than-expected data

    USD

    Signs of a buoyant housing market helped support the dollar on Wednesday.

    New Home Sales in March rose to 5.19m from 4.89m in the previous month. Analysts had expected an increase to a lesser figure of 5.03m. This represented a 6.1% increase, which beat forecasts of 3.1%, and the 1.5% print in February.

    Other data showed a rise in MBA Mortgage Applications in w/e April 17, which showed an increase of 2.3%, which contrasted with the -2.3% of the previous week.

    Other data also indicated the U.S housing market remained healthy, for example, the House Price Index rose by 0.7% in February, from a 0.3% in January – beating the 0.5% increase forecast.

    EUR

    The euro weakened on Wednesday after sentiment data showed an unexpected fall in confidence bringing into doubt the strength of the recovery.

    Euro-zone Consumer Confidence fell to -4.6 in April from -3.7 previously when investors had expected -2.5.

    Concerns that the ECB would cap its emergency loan assistance (ELA) to Greek banks proved unfounded on Wednesday after it was reported in Germany’s Handelblatt newspaper that ELA had been increased by a further 1.5bn euros.

    In commentary Greek Secretary of State Papas said he wanted a deal with lenders but was emphatic about refusing the demands for cuts to pensions and VAT hikes, which the IMF/E.U have so far been requesting as part of the list of conditional bailout reforms.

    GBP

    Wednesday saw the release of the BOE April Meeting minutes. It showed the committee voted unanimously to keep rates unchanged. Sterling rose after the tone of the minutes was taken as vaguely more hawkish.

    Two policy-makers said that argument for raising rates had been “finely balanced” indicating the possibility of dissent in future meetings.

    The minutes also acknowledged an up-turn in the Euro-zone – a close trading neighbour with the U.K – and this was part of the reason for the more hawkish tone. Exports to Europe have suffered ever since the region entered a crisis in 2008, but the minutes revealed that policy-makers expect there to be an improvement in exports as a result of the brighter outlook in the euro-zone.

    The market consensus remains that the BOE will probably hike rates in early 2016. According to the analyst Alan Clarke at Scotia Bank: “The only way is up for interest rates, but not yet: the tone from the MPC seems to be taking baby steps in a hawkish direction.”

    JPY

    Greek debt problems have prompted a flight to safe haven currencies and the yen has benefited as well as the dollar pushing the pairing 30 points to 119.90 in the Asian trading session.

    Japan reported a better than expected March trade surplus and improved corporate earnings. Unadjusted the trade surplus came in at 229 billion yen, the first surplus since 2012.Exports surged 8.5% yoy, while imports fell -14.5% in March following a -3.6% drop in the previous month.

    The positive surprise was due to strong exports of autos and electronics, while the cheaper oil prices pushed the cost of imports lower. This is a positive sign for the Japanese economy, which has been sluggish since the start of the year.

    The ‘Abenomics’ experiment in competitive devaluation are showing some positive results particularly in rejuvenating growth. Demand for Japanese goods should continue as Europe and China recover, and whilst oil prices remain depressed, costly imports will be less appealing than domestic goods.

    Today the Nikkei reported that the BOJ is likely to cut the inflation forecast for 2015 by at least 0.5% from the current 1% forecast. The new forecast will be in the semi-annual report due on April 30.The central bank sees inflation hitting 2% target in FY 2016 and 2017.

    USD

    Signs of a buoyant housing market helped support the dollar on Wednesday.

    New Home Sales in March rose to 5.19m from 4.89m in the previous month. Analysts had expected an increase to a lesser figure of 5.03m. This represented a 6.1% increase, which beat forecasts of 3.1%, and the 1.5% print in February.

    Other data showed a rise in MBA Mortgage Applications in w/e April 17, which showed an increase of 2.3%, which contrasted with the -2.3% of the previous week.

    Other data also indicated the U.S housing market remained healthy, for example, the House Price Index rose by 0.7% in February, from a 0.3% in January – beating the 0.5% increase forecast.

    EUR

    The euro weakened on Wednesday after sentiment data showed an unexpected fall in confidence bringing into doubt the strength of the recovery.

    Euro-zone Consumer Confidence fell to -4.6 in April from -3.7 previously when investors had expected -2.5.

    Concerns that the ECB would cap its emergency loan assistance (ELA) to Greek banks proved unfounded on Wednesday after it was reported in Germany’s Handelblatt newspaper that ELA had been increased by a further 1.5bn euros.

    In commentary Greek Secretary of State Papas said he wanted a deal with lenders but was emphatic about refusing the demands for cuts to pensions and VAT hikes, which the IMF/E.U have so far been requesting as part of the list of conditional bailout reforms.

    GBP

    Wednesday saw the release of the BOE April Meeting minutes. It showed the committee voted unanimously to keep rates unchanged. Sterling rose after the tone of the minutes was taken as vaguely more hawkish.

    Two policy-makers said that argument for raising rates had been “finely balanced” indicating the possibility of dissent in future meetings.

    The minutes also acknowledged an up-turn in the Euro-zone – a close trading neighbour with the U.K – and this was part of the reason for the more hawkish tone. Exports to Europe have suffered ever since the region entered a crisis in 2008, but the minutes revealed that policy-makers expect there to be an improvement in exports as a result of the brighter outlook in the euro-zone.

    The market consensus remains that the BOE will probably hike rates in early 2016. According to the analyst Alan Clarke at Scotia Bank: “The only way is up for interest rates, but not yet: the tone from the MPC seems to be taking baby steps in a hawkish direction.”

    JPY

    Greek debt problems have prompted a flight to safe haven currencies and the yen has benefited as well as the dollar pushing the pairing 30 points to 119.90 in the Asian trading session.

    Japan reported a better than expected March trade surplus and improved corporate earnings. Unadjusted the trade surplus came in at 229 billion yen, the first surplus since 2012.Exports surged 8.5% yoy, while imports fell -14.5% in March following a -3.6% drop in the previous month.

    The positive surprise was due to strong exports of autos and electronics, while the cheaper oil prices pushed the cost of imports lower. This is a positive sign for the Japanese economy, which has been sluggish since the start of the year.

    The ‘Abenomics’ experiment in competitive devaluation are showing some positive results particularly in rejuvenating growth. Demand for Japanese goods should continue as Europe and China recover, and whilst oil prices remain depressed, costly imports will be less appealing than domestic goods.

    Today the Nikkei reported that the BOJ is likely to cut the inflation forecast for 2015 by at least 0.5% from the current 1% forecast. The new forecast will be in the semi-annual report due on April 30.The central bank sees inflation hitting 2% target in FY 2016 and 2017.


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