BUZZ-COMMENT-US recap: EUR/USD makes month-end and March lows before key US data

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- The dollar index rose 0.1% Friday and 3% on the quarter, with early Friday period-end gains aided by Fed Governor Christopher Waller's reiterated view that there's no need to rush rate cuts, but USD/JPY's hefty 7.3% Q1 advance petered out after seven days and three years of peaks just below 152.

EUR/USD was among the harder hit pairings early in the session, not least due to a very weak German retail sales report in the wake of Waller's dollar supportive views, which also highlighted his and the Fed's data dependence while debating when and by how much rates ought to be cut.

Today's Q4 U.S. GDP revisions, jobless claims, Chicago PMI, final Michigan sentiment and pending homes sales may have contributed to trimming of earlier Treasury yield and dollar gains, though how much amid pre-holiday and period-end flows is hard to decipher. But the dive in the Chicago PMI to 10-month lows and Michigan 1-yr and 5-yr inflation expectations dips at least offset upwardly revised current and expected conditions and firmer Q4 GDP with mixed PCE changes.

The macro focus now shifts to Friday's core PCE, income and spending reports, though released with markets, except currencies, closed in the U.S. That will be followed by ISM manufacturing on Monday, JOLTS on Tuesday, ADP and non-manufacturing ISM on Thursday and the employment report on Friday.

If they are as or near forecast they shouldn't substantially change the current market pricing in of three Fed cuts before year-end, likely beginning in June. If they lean hawkish and show the economy again proving more resilient than many have expected, Treasury yields and the dollar should rise and vice versa.

EUR/USD fell 0.28%, though it recovered from its lowest since Feb. 20, with the 1.0775 EBS low at the uptrend line support across October and February lows there.

USD/JPY trod water after seven straight sessions and three consecutive years with highs just shy of 152. Ongoing FX intervention threats from Japanese officials have made a breakout riskier for a market that already has IMM net spec longs nearing their highest since 2017 and Treasury-JGB yields spreads consolidating below this year and last year's peaks.

That as eventual Fed rate cuts are priced against the BoJ's exit last week from negative rates, even though its policies remain extremely easy. Tokyo CPI on Friday will get a glance as a possible preview of March's national CPI result.

Sterling fell 0.12%, but came well off Friday's 1.2583 lows by the 200-day moving average and just above March's 1.2572 trough.

USD/CAD fell 0.23% following above-forecast Canadian GDP and a 2% jump in crude prices.

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(Editing by Burton Frierson
Randolph Donney is a Reuters market analyst. The views expressed are his own.)

((Randolph.donney@thomsonreuters.com))

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