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Volatility in European currencies stepped up thanks to a heavy round of economic data, as well as comments from SNB Chairman Thomas Jordan.

  • Swiss trade balance: CHF 3.10B vs. CHF 3.01B expected, CHF 3.12B previous
  • French GDP (Prelim) q/q: 0.3% vs. 0.4% expected, 0.5% previous
  • German Retail Sales m/m: 0.1% vs. 1.1% previous
  • French Consumer Spending y/y: -1.0% vs. 0.9% expected, 0.5% previous
  • French PPI m/m: -0.5% vs. -0.3% previous
  • French HICP (Prelim) m/m: 0.1% vs. 0.1% expected, 0.7% previous
  • French CPI (Prelim) m/m: 0.1% vs. 0.1% expected, 0.6% previous
  • KOF Leading Indicator: 106 vs. 107.5 expected, 107.6 previous
  • European M3 Money Supply (sa) y/y: 5.3% vs. 4.7% expected, 4.7% previous
  • U.K. GDP (prelim) q/q: 0.3% vs. 0.4% expected, 0.7% previous
  • U.K. Mortgage Approvals: 41.06 vs. 42 expected, 42.61 previous
  • Europe Flash HICP y/y: 1.9% vs. 1.8% expected, 1.5% previous
  • Europe Flash core HICP y/y: 1.2% vs. 1.0% expected, 0.7% previous

Major Events/Reports:

SNB Chairman Jordan spoke at the Swiss National Bank’s annual shareholder meeting in Bern today.  It looks like the SNB remains open to buy more foreign currency and lower rates further into negative territory if needed, citing “low inflation and underutilisation of production capacity” is still a concern.

And as usual, he noted that the Swiss franc remains “significantly overvalued,” so don’t expect them to cut currency interventions any time soon as a rising franc tends to hurt price inflation and Switzerland’s export economy, which is over 60% of GDP.

The Swiss franc popped higher early in the session, strange given not only the continued currency intervention talk but also the downtick in sentiment as indicated by the KOF Economic Barometer. It’s possible that the better-than-expected trade balance read shows that franc strength fears may be a little bit overboard.

European inflation surprises higher – Eurostat released its latest read on inflation, showing a better-than-expected increase of 1.9% year-over-year, just a tick away from the European Central Bank’s target at 2%. Core inflation (minus energy and unprocessed foods) also surprised higher, coming in at 1.2% vs. the market’s expectation of 1.0%.

This is a good sign of strength in the European recovery, which was noted by Mario Draghi at the monetary policy meeting on Thursday.  It is likely put pressure on the ECB to take a step towards reducing its stimulative monetary policy of negative rates and the bond-purchasing program, which is likely fueling the broad euro strength we saw earlier in the morning London session.

Major Market Mover(s):

GBP – The British pound picked up on volatility today, likely due to the release of the preliminary Q1 2017 GDP read, which came in slightly below expectations but previous reads on a year-over-year basis. The uncertainty of Brexit could be starting to show as growth came in a less than half the pace of 2016…yikes!

After popping higher with the other European currencies at the London open, the bears took back control of Sterling as we headed into the U.S. trading session, tempering session gains on pound pairs.

GBP/USD was down by 1 pips (-0.01%) to 1.2903, GBP/AUD was up by 36 pips (+0.21%) to 1.7311, GBP/NZD was up by 68 pips (+0.36%) to 1.8831

CHF – As mentioned above, the Swiss franc jumped higher in an odd reaction to the SNB Chairman’s openness to further stimulative policy and weaker sentiment data.

CHF/JPY was up by 54 pips (+0.48%) to 1.0828, GBP/CHF was down by 10 pips (-0.08%) to 1.2814, EUR/CHF was down by 10 pips (-0.08%) to 1.2814

EUR – Inflation data was likely the main catalyst, but we also saw positive German Retail sales data and an increase in the M3 money supply data, supporting further positive sentiment for the European recovery and the euro in morning trade:

EUR/USD was up by 39 pips (+0.36%) to 1.0828, EUR/AUD was up by 44 pips (+0.44%) to 1.4621, EUR/GBP was up by 25 pips (+0.30%) to 0.8448

Watch Out For:

  • 12:30 pm GMT: Canadian GDP m/m (0.1% expected, 0.6% previous)
  • 12:30 pm GMT: Canadian Industrial Product Price Index m/m (0.3% expected, 0.1% previous)
  • 12:30 pm GMT: U.S GDP annualized (1.0% expected, 2.1% previous)
  • 1:45 pm GMT: U.S. Chicago PMI: (56.3 expected, 57.7 previous)
  • 2:00 pm GMT: U.S. Univ. of Michigan Sentiment (final) (98 expected, 98 previous)
  • 5:15 pm GMT: Fed’s Brainard speaks in Eanston, Illinois
  • 6:30 pm GMT: Fed’s Harker speaks in Washington