Improving Eurozone economic data likely to finally boost EUR over coming months, says Scotiabank

Improving Eurozone economic data could finally boost the EUR in the coming months, which will be supportive of the SGD and CNH as well if the US and China reach a trade deal, according to the latest research report from Scotiabank.

US producer price index (PPI) rose a seasonally adjusted 0.2 percent in April from a month earlier, undershooting market expectations for a 0.3 percent increase. The overall PPI was up 2.2 percent on a year-on-year basis last month compared to market estimate of 2.3 percent.

The Bureau of Labor Statistics is due to release fresh CPI inflation on Friday. The 10-year UST yield declined about 4 bps to 2.442 percent, while the 3m-10y UST yield curve inverted temporarily amid continued risk-off sentiment.

Price pressures have remained moderate in the US, which could cap upside room for the 10Y UST yield. US President Donald Trump said at the White House on Thursday that he received a "beautiful letter" from Chinese President Xi Jinping, urging the two countries to "work together" to resolve their dispute.

President Trump added that he expected to have a phone call soon with President Xi and insisted a trade deal with China was still possible to reach this week, even as he reiterated plans to raise tariffs on USD 200bn worth of Chinese goods within hours.

Chinese Vice Premier Liu He has started talks with US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin from 5am HKT Friday. There were smiles with Lighthizer and Mnuchin when they were greeting Liu.

"It would improve market sentiment and prop up regional currencies to some extent should the US and China be able to deescalate trade tensions this morning. Meanwhile, we would like to sell USD/JPY on rallies given hovering external uncertainty and benign US inflation outlook," the report further commented.