FX Awaits US Data, CDO Effect

The dollar retains composure amid renewed gradual paring of risk appetite following fresh declines in US and European equities in the midst of mounting uncertainty regarding the impact of sub-prime lending defaults on US hedge funds and investment banks holding the affected collateralized debt obligations. While the extent of the potential fallout from these bonds remains undetermined, currency markets are taking the developments in stride, with risk appetite largely in place and high yielding currencies boosted by higher rising interest rates. Renewed labor unrest in Nigeria??�s national oil company is driving crude prices back above $69.50 per barrel, nearing its highest level since September. The threat of escalating gas prices on US consumers may be shadowed by troubled hedge funds involved in sub-prime lending CDOs, but further erosion in US equities may add to the deteriorating wealth effect to US investors.

The US calendar is back in action with weekly jobless claims, leading indicators index and Philly Fed survey all due. Jobless claims (8.30 am) are expected little changed at 312K, showing continued tightness in the US labor market.

The index of leading indicators (10 am EST) is expected to have rebounded 0.2% last month following a 0.5% decline in April, 0.6% rise in March and 0.6% decline in February.

The Philly Fed index on manufacturing activity (noon EST) is expected up at 7.0 in June following 4.2 and 0.2 in May and April respectively.

Euro seeks support at 1.3370s

USDJPY faces temporary pressure

CAD awaits key retail sales

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