• USD: Mixed, jobless claims fall, durable goods rise, housing data weak, bond yields at six-month high
  • JPY: Lower, pressured by heavy Japanese investor outflows in search of yield
  • EUR: Higher, EU economic sentiment improves and German unemployment rate falls
  • GBP: Lower, CBI retail sales fall more than expected, BOE’s Blanchflower warns recovery may be delayed
  • CAD and AUD: AUD & CAD higher, crude rises above $64 a barrel , risk sentiment improves

Overview

USD rallied sharply versus the JPY, traded weaker against Europe and the commodity currencies. The USD is supported versus JPY by a rise in US bond yields to a six-month high and Moody's affirmation of US AAA bond rating. The Moody's affirmation of US debt rating reduces fear that investor demand for US bond auctions will decline. JPY was also pressured by report of the investor outflows as Japanese investors seek higher yield abroad, encouraged by rising optimism about the global economy. The rise in US bond yields reflects improving economic optimism and concern about increased supply as US budget deficit grows. The USD was pressured versus EUR by optimism about the global recovery and unwind of safe haven positions. EUR was supported by report of improving EU economic sentiment and falling unemployment in Germany. CHF edged higher supported by report of widening trade surplus as exports rise 8.3% in April. GBP drifted lower pressured by report of weaker than expected CBI retail sales and comments from BOE’s Blanchflower that UK recovery will likely be delayed. The commodity currencies firmed supported by rising risk appetite and higher crude prices as OPEC keeps production levels unchanged. Crude oil prices traded above $64 a barrel supported by report of a 5.4 mln barrel drop in crude inventories. Better than expected rise in US April durable goods orders and a drop in jobless claims added to speculation that the worst of the US economy has passed. Existing home sales data came in weaker than expected and the USD pared losses as equity markets decline and uncertainty about US recovery resurfaces.

Today’s US data:

US April goods orders rise 1.9%, the trade was looking for a 0.8% decline. Jobless claims fall 13K to 623K the trade was looking for a decline to 620K. Continuing claims rise to another record high. This report suggests that the US economy and labor market is stabilizing. April new home sales rise just 0.3% compared to 3% decline in March, the trade was looking for a 1% rise. Equities reversed early gains in reaction to the disappointing new home sales report. The report suggests that the US housing market remains weak

Upcoming USD data:

On May 29th, Q1 GDP will be released expected at -5.6% compared to -6.1% last quarter. Chicago PMI and Michigan consumer sentiment will also be released on May 29th. Chicago PMI is expected to rise to 42 from 40.1 last month and the University of Michigan sentiment expected at 67.9 compared to 65.1 last month.