FX market outlook

The New Zealand dollar was one of the best performers after inflation beat forecasts. Elsewhere, most major currency pairs remained in recent ranges as geopolitical concerns and French election risks are keeping investors cautious.

Inflation in New Zealand accelerated to 2.2% year-on-year versus 2.0% expected and was the highest in five years. On the quarter, CPI rose 1.0% versus 0.8% expected. Soon after the release of the data the kiwi surged against its US counterpart to $0.7043 and held gains throughout the session.

In other data, Japan’s trade balance total for March came above expectations and exports rose at the fastest rate in more than two years in March.

The dollar briefly rose above the 109-yen level but remained in the upper 108 range. On Wednesday, the Federal Reserve released the Beige Book, which is its report on the US economy. It was quite upbeat and this helped lift US Treasury yields and supported the greenback.

The euro remained in the $1.0700 handle and edged up towards $1.0740 by the European open. Larger gains for the euro are expected to be limited ahead of this weekend’s French vote.

Centrist candidate Emmanuel Macron held onto his lead in the latest polls and is a favourite to win Sunday’s first round. A Macron victory is perceived to be positive for the euro.

Oil prices held onto losses after a big tumble on Wednesday following the EIA crude inventory report that showed an unexpected build in gasoline supplies in the US.

WTI oil slid over $2 after the data, to fall below $51 a barrel and Brent crude dipped below $53 a barrel. Both benchmarks steadied in Asian trading today.

Looking to the rest of the day, focus will be on data out of the US, which include jobless claims and the Philly Fed manufacturing index.