NEWS / Foreign Exchange

Daily FX Commentary

The Friday data will help determine whether greater confidence in the US economy and dollar is justified.

The dollar was unable to make a fresh challenge on 1.3410 against the Euro and weakened to lows around 1.3470 before a recovery back to 1.3450 in choppy trading. The Euro secured further support from buying interest on the crosses with renewed Euro/yen buying. The dollar was holding close to 1.3450 in early Europe on Friday ahead of the US data releases with a slightly firmer bias.

First-quarter US GDP growth was revised down to 0.6% from the original 1.3%. A larger reported drop in inventories and a weaker trade report contributed to the downgrade while consumer spending held firm.

There was a small fall in jobless claims in the latest week while the Chicago PMI manufacturing survey rose strongly to 61.7 in May from 52.9 the previous month. There will be greater optimism that the manufacturing sector is rebounding and the Friday data will be watched closely to assess whether this confidence is justified.

The Chicago PMI prices index was the highest for 10 months while the core GDP deflator was running at 2.2% which will keep the Federal Reserve on inflation alert, especially if there is a firm PCE core inflation figure on Friday. The dollar will gain support if the increase in US yields is sustained, but the impact will be curbed by the fact that Euro-zone yields have also increased over the past week.