Bonds Asia: Strong Economic Data Pushes Dollar Index Rebound and Closes Higher

April 3, a survey by the Bank of England showed that, driven by a surge in energy costs triggered by the conflict in the Middle East, UK businesses plan to further increase their price hikes. The companies surveyed in March said they intend to raise prices by 3.7% over the coming year, higher than the 3.4% expected in February, reaching the highest level since October last year. At the same time, businesses’ expectation for the overall consumer price inflation rate is 3.5%, versus 3% in February. The Bank of England said on Thursday that this increase “indicates that businesses have adjusted their expectations due to the recent rise in energy prices.” The survey began on March 6 and ended on March 20, receiving 2,004 responses in total. The data show that as the Strait of Hormuz, a key energy corridor, remains closed, countries worldwide are being hit, and the UK’s inflation pressure is building. Bank of England policymakers are weighing the risks of a chain reaction between prices and wages, as well as threats to economic growth and employment. Bank of England Governor Andrew Bailey said in an interview on Wednesday that he believes businesses have limited ability to pass on higher costs.

In addition, last week, the number of Americans filing for unemployment benefits for the first time fell to one of the lowest levels in nearly two years, indicating that layoffs by businesses remain relatively weak. Data released by the U.S. Department of Labor on Thursday showed that, for the week ending March 28, initial claims for unemployment benefits decreased by 9,000 to 202k. The median forecast in a survey of economists was 212k. As an alternative indicator for the number of people receiving unemployment benefits, the number of continuing claims for unemployment benefits rose in the prior week to 1.84 million. Thursday’s data, along with other recent economic indicators, showed that the U.S. job market is still stuck in a “low hiring, low layoffs” phase. Over the past few weeks, initial claims have hovered at relatively low levels, suggesting that although hiring has slowed, employers are still retaining existing employees.

Today’s key data to watch are the U.S. March nonfarm payrolls employment change, seasonally adjusted, and the U.S. March unemployment rate.

U.S. Dollar Index

The U.S. Dollar Index fluctuated higher yesterday, reclaiming the 100.00 level, and the spot exchange rate is currently trading near 100.00. In addition to some support from short covering, renewed concerns over geopolitical tensions, which sparked safe-haven demand for the dollar, are also important factors supporting the rise in the exchange rate. Also, strong economic data released by the U.S. during the period provided some support for the exchange rate. Today, watch the pressure near 100.50; downside support is near 99.50.

EUR/USD

The EUR fell yesterday, fluctuating lower; it closed slightly down on the day, and the spot exchange rate is currently trading near 1.1540. In addition to some drag from profit-taking, the U.S. Dollar Index rising supported by good economic data and market safe-haven buying is also an important factor putting pressure on the euro to weaken. In addition, cooling expectations for interest rate hikes by the European Central Bank is also exerting some pressure on the exchange rate. Today, watch the pressure near 1.1650; downside support is near 1.1450.

GBP/USD

The GBP fell yesterday, fluctuating lower; it closed slightly down on the day, and the spot exchange rate is currently trading near 1.3230. In addition to some drag from profit-taking, the U.S. Dollar Index rebounding and reclaiming the 100.00 level on support from good economic data and revived risk-averse sentiment is also an important factor weighing on sterling. In addition, cooling expectations for interest rate hikes by the Bank of England is also exerting some pressure on the exchange rate. Today, watch the pressure near 1.3300; downside support is near 1.3150.

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