The safe-haven dollar, yen and Swiss franc rallied against the Ukraine-crisis beleaguered euro nL2N2VW04T, as Russia demanded purchases of its nat gas exports be made in roubles nL5N2VX7KZ as the ECB grapples with multi-decade high inflation and growing recession risk nL2N2VY0V9.
Despite the upward spiral in euro zone inflation, ECB chief economist Philip Lane said price growth is increasingly likely to stabilize around 2%, but the European Central Bank should be ready to change course if the outlook deteriorates due to Russia's war in Ukraine nL5N2VY2NL.
The market is pricing in at least two 25bp ECB hikes in H2 versus 200 bps of hikes by the Fed by year-end.
Two-year Bund-Treasury yield spreads fell 9 bps after rising 16 bps from Monday's trough to Wednesday's peak.
Bund and Treasury yields fell on a recessionary China ISM nL2N2VY03I, plans for a U.S. Strategic Petroleum Reserves release nL2N2VY1RT -- even as European nat gas prices climbed on Russian supply unease -- plus period-end position-squaring and dip-buying after bonds suffered one of the worst quarters since the 1980s.
The drop in Bund-Treasury yield spreads made this week's EUR/USD rebound ripe for retracing.
consumer spending rose less than forecast and income matched expectations, but a 0.6% headline PCE rise meant real income and spending fell 0.1% and 0.4% month-on-month nL2N2VY18J.
A 0.8% rise in wages and jobless claims at or near lows last seen in 1969 favored Fed hawks.
According to the Challenger report, layoffs recorded a noticeable rise that may bear watching.
EUR/USD was down 0.77% and back down by the converged tenkan and kijun at 1.1065/58 after its fleeting 1-month high at 1.1185 on EBS.
The fall in euro zone yields amid soaring inflation highlighted disparity between Ukraine crisis fallout fears and still limited ECB rate hike expectations nL2N2VY1DW.
USD/JPY was down 0.2%, but up from a failed attempt to take out Wednesday's lows by key tech supports at 121.18/02 after the BOJ expanded its QE program to further restrain JGB yield rises nL2N2VY1UX.
Softer Treasury yields, the drop in oil prices, unwinding of March's hugely overbought 9% rally and fiscal year-end flows weighed on prices, allowing them to trade entirely below March's extreme uptrend line.
The new Japanese fiscal year flows and U.S. jobs and ISM data Friday could determine whether the props by 121 suffice or whether a 50% correction and Kijun test at 119.755 on EBS will be needed to reset stretched techs.
Sterling was about flat, again capped near 1.3180, as BoE dithering leaves it somewhat at the mercy of Fed and ECB policies nL2N2VY1EA.
Commodity currencies, with the exception of the falling rouble, were also little changed.
Bitcoin and Ether were down about 3%, pulled away from this week's rallies into 55-day moving average resistance by the broader risk-off flows.
Friday features the U.S. jobs report and manufacturing ISM.
Hourly earnings may be nearly as important as nonfarm payrolls and the jobless rate with regard to Fed tightening and the dollar.
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