Dollar Shrugs off News on Trump’s Infrastructure Spending, Euro Soft after German CPI

Dollar trades mixed today in spite of news about US President Donald Trump’s infrastructure spending. US Transportation Secretary Elaine Chao said the Trump would unveil a USD 1T infrastructure plan over ten years, later this year. But no detail was provided. Chao said that the plan would cover "more than transportation infrastructure, it will include energy, water and potentially broadband and veterans hospitals as well." However, the news is shrugged off by investors as they remain skeptical on Trump’s ability push through his economic policies.

Released from US, initial jobless claims dropped 3k to 258k in the week ended March 25, above expectation of 245k. The four week moving average rose from 246.5k to 254.25k. Continuing claims rose 65k to 2.05m in the week ended March 18. Q4 GDP growth was revised up to 2.1% annualized, above expectation of 2.0%. GDP price index was also revised up to 2.1%. From Canada, IPPI rose 0.1% mom in February, RMPI rose 1.2% mom.

Euro stays soft on weak German CPI

Euro has been under some pressure as markets reassess the possibility of early stimulus exit by the central bank. And the common currency stays soft after mixed data. In particular, German CPI rose 0.2% mom, 1.6% yoy in March, slowed from 0.6% mom and 2.2% in February, and missed expectation of 0.4% mom, 1.8% yoy. Eurozone business climate was unchanged at 0.82 in March versus expectation of 0.87. Economic confidence dropped to 107.9 versus expectation of 108.3. Industrial confidence dropped to 1.2 versus expectation of 1.4. Services confidence dropped to 12.7 versus expectation of 14.0. Consumer confidence was finalized at -5. Also from Europe, Swiss KOF leading indicator rose to 107.6 in March.

ECB Nowotny: strategy for 2017 largely set

A Reuters report quoted unnamed source saying yesterday that the markets have over-interpreted ECB’s message in the March meeting. Today, ECB governing council member Ewald Nowotny said together that "the strategy for 2017 has largely been set and from my point of view there is no reason to depart from this." Also, another governing council member Klass Knot said that "only if the economy does even better than we now expect in our estimates could we consider bringing the tapering forward." Regarding ending asset purchase before rate hike, Knot said that "this sequence makes sense, the forward guidance makes sense and I don’t see a need to revisit that now."

EC Tusk to UK: We already miss you

European Council President Donald Tusk expressed his emotion on receiving the Brexit trigger letter from UK. Tusk said that there is "no reason to pretend that this is a happy day, neither in Brussels, nor in London." And, "what can I add to this? We already miss you." However, French President Francoise Hollande told May in a phone call that he opposed to negotiating the trade deal together with withdrawal from EU. A statement from Hollande’s Élysée office said that "The president indicated that the talks must at first be about the terms of withdrawal, dealing especially with citizens’ rights and obligations resulting from the commitments made by the United Kingdom. On the basis of the progress made, we could open discussions on the framework of future relations between the United Kingdom and the European Union." German Chancellor Angela Merkel expressed similar view yesterday.

UK prime minister Theresa May said in the Brexit letter than "we are leaving the European Union, but we are not leaving Europe – and we want to remain committed partners and allies to our friends across the continent."Brexit secretary David Davis said that UK will publish details on converting EU laws into UK laws to pave the way for a smooth transition and avoid any legal black holes. Davis said that "converting EU law into U.K. law, and ending the supremacy of lawmakers in Brussels, is an important step in giving businesses, workers and consumers the certainty they need."

BoJ Iwata: No need to buy US treasuries

In Japan, BoJ Deputy Governor Kikuo Iwata said that there is no need to buy US treasuries as sufficient monetary easing could be done by JGB purchases. He told parliament that "we can achieve our 2 percent inflation target and seek an eventual exit from our quantitative easing program without buying U.S. Treasury debt." And he warned that "buying U.S. Treasury debt unnecessarily would be interpreted as currency intervention."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0727; (P) 1.0777 (R1) 1.0814; More…..

EUR/USD’s fall continues today and reaches as low as 1.0721 so far. Current development argues that corrective rise from 1.0339 could be completed at 1.0905. Intraday bias remains on the downside for 55 day EMA (now at 1.0682) first. Sustained break there will affirm this view and target 1.0494 resistance for confirmation. On the upside, above 1.0798 minor resistance will turn bias back to the bias up to the upside for 1.0905 instead.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate term reversal. this would also be supported by sustained trading above 55 week EMA.

Economic Indicators Update