North American Summary and Highlights 21 Mar
Overview - The USD was generally stronger, particularly versus the CHF after the SNB eased policy and the GBP, after a more dovish policy hold from the BoE.
North American session
The USD advanced broadly in North America, with the strongest move coming against the GBP. The BoE left rates as expected but the two hawkish dissenters from the previous meeting this time backed the 8-1 majority, with the only dissent being a dovish one. Also noted was an implicit easing bias contained in the statement 'the Committee will keep under review for how long Bank Rate should be maintained at its current level'. EUR/GBP advanced to .8580 while GBP/USD fell almost a big figure to near 1.2650. EUR/CHF stabilized at higher levels around .9760.
US data was generally on the firm side, with initial claims still low at 210k, a second straight positive Philly Fed manufacturing survey, a narrower current account deficit and later a sharp 9.5% rise in existing home sales. S and P PMIs were mixed with manufacturing stronger but services slower. EUR/USD fell 50 pips to 1.0960 and USD/JPY rose 60 pips to 151.70. AUD and CAD also saw moderate losses despite a brief CAD uptick after Deputy Governor Gravelle said the BoC would persist with quantitate tightening.
European morning session
The CHF was then big mover through the European morning, with EUR/CHF rising a big figure when the SNB decided to cut their policy rate to 1.5% from 1.75%. This had been priced as around a 40% chance by the market, although surveys indicated only around 25% of forecasters were looking for a cut.
Otherwise, we had European PMIs, with Eurozone showing a slightly larger than expected rise in the composite index, due to strength in services, while manufacturing disappointed. The UK PMI split was reversed, with stronger manufacturing and weaker services and composite, but the net FX impact was small, with initial GBP gains reversed by the end of the morning.
EUR/NOK finished the morning little changed after Norges Bank left rate unchanged as expected. There was a small NOK gain immediately after the announcement, as Norges Bank maintained their stance that rate cuts aren’t likely until the autumn, and only marginally reduced their projected policy rate into 2025.
The USD was net slightly stronger through the morning, with EUR/USD dropping around 15 pips and USD/JPY edging around 10 pips higher.