Market Review - 17/04/2019  23:54GMT  

Dollar pares losses as euro and sterling falls on soft inflation data

Although the greenback initially dropped in Asia and European morning due to upbeat China economic data which boosted risked appetite, dollar pared its losses in New York and ended broadly higher against majority of its peers on Wednesday due to weakness in euro and sterling after soft inflation data from EZ and UK.  
Reuters reported China's economy grew 6.4 percent in the first quarter from a year earlier, official data showed on Wednesday, above expectations and steady from the previous quarter, helped by sharply higher factory production.   
Analysts polled by Reuters had expected growth to slow slightly to 6.3 percent in the January-March quarter, the slowest pace in at least 27 years.   They also reported China's industrial output grew 8.5 percent in March from a year earlier, the fastest pace since July 2014, official data showed on Wednesday, as factories ramped up output in anticipation of more businesses amid government support measures.   Analysts polled by them had expected industrial output would grow 5.9 percent, accelerating from 5.3 percent in the combined January-February period.   
Versus the Japanese yen, although dollar initially jumped to a near 4-month high of 112.17 on broad-based cross-unwinding in jpy at Asian open, price met renewed selling and fell to 111.92 in Asia before recovering to 112.06 in European morning but only to retreat back to 111.93 in New York morning on falling U.S. Treasury yields and then moved narrowly in New York afternoon session.  
Although the single currency found renewed buying at 1.1279 in Australia and rose steadily to session highs at 1.1324 in European morning on increased risk appetite, price later retreated after release of soft euro zone inflation data and hit 1.1291 in New York morning, price last traded at 1.1294 near the close.  
Reuters reported euro zone inflation slowed in March and the core figure dipped, the European Union's statistics office said on Wednesday, confirming its initial estimates and providing an uncomfortable signal for the European Central Bank (ECB).   
Eurostat said prices in the 19-nation currency bloc rose 1.4 percent in March on the year, from a 1.5 percent increase a month earlier, confirming the previous reading.   On the month, inflation accelerated to 1.0 percent, as markets had expected, from 0.3 percent in February.   
The core indicator watched closely by the ECB for its monetary policy decisions, which excludes volatile energy and food prices, dropped to 1.0 percent in March on the year from 1.2 percent in February. That was the weakest reading since April 2018, Eurostat data showed, confirming earlier estimates.  
The British pound went through a roller-coaster ride. Although cable rose in tandem with euro from 1.3033 at Asian open to session highs at 1.3068 ahead of European open, price erased intra-day gains and dropped to a near 2-week low of 1.3029 in New York after soft UK inflation data as well as renewed buying in usd.  
they also reported the ONS said UK consumer prices rose at an annual rate of 1.9 percent in March, the same rate as in February. A Reuters poll of economists had pointed to 2.0 percent.  
In other news, euters reported the German government cut its 2019 growth forecast for the second time within three months on Wednesday, reflecting a worsening slowdown in Europe's largest economy driven by a recession in the manufacturing sector.   
Berlin now expects gross domestic product growth of 0.5 percent this year. In January, the government had cut its growth estimate to 1.0 percent from 1.8 percent previously.   For 2020, the government envisages a rebound with economic expansion of 1.5 percent.   
Data to be released on Thursday :  
Australia manufacturing PMI, services PMI, employment change, unemployment rate, Germany producer prices, Markit manufacturing PMI, Markit services PMI, Swiss trade balance, imports, exports, France Markit manufacturing PMI, Markit services PMI, EU Markit manufacturing PMI, Markit services PMI, UK retail sales, Italy industrial orders, industrial sales, U.S. initial jobless claims, Philadelphia Fed survey, retail sales, Markit manufacturing PMI, Markit services PMI, business inventories, leading indicator, and Canada ADP employment change, retail sales.  

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