Currencies Churn, but Little Net Movement

The US dollar is a softer, but well within the recent ranges.  Over the past five sessions, the G10 currencies are mostly plus/minus 1%, with the yen being the sole exception up 1.6%.   The Australian dollar is leading the move today, spurred by the stronger than expected jump in employment (44k vs consensus 6.5k).   The Australian dollar is toying with its 20-day moving average ($1.04), which it has not closed the North American session above since early March. 

Italy's bond auction saw lukewarm reception but its bonds in the secondary market are rallying.  The yield on the benchmark 10-year bond is off about 7 bp, though the 5-year CDS is steady-to-firmer.   Separately, the euro area reported that  Feb industrial output rose 0.5%, while the consensus called for a 0.2% decline.  The surprising boost came from energy output, which rose to a six month high.  It may be weather related and unlikely to be sustained. 

The $1.3160 has capped the euro, but a break cannot be ruled out and it would likely trigger a move to $1.3200.  Nearby support is seen $1.3090-$1.3100.   Preference remains to sell into euro bounces ahead of jammed political calendar that kicks off with the French elections in ten days time. 

The UK reported a largest than expected trade deficit of GBP8.7 bln, but this has not deterred the market from pushing sterling to its highest level since April 3.  The $1.60 area still marks an important resistance area.    More inclined to play sterling from the short side with it being near the upper end of its range. 

US reports weekly initial jobless claims, March producer prices and the Feb trade balance.  The risk is on the upside for weekly jobless claims, which will though remain near cyclical lows.  After yesterday's larger than expected rise in import prices (1.3% vs 0.8% expected), there is some upside risk to the PPI report.  The real trade balance may be little changed to smaller, but in nominal price terms, the risk is probably on a wider deficit.  Growth differentials also warn of the risk of deterioration of the US trade balance.