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    Dollar weakens after more bad data starts to erode rate hike expectations

    USD

    The dollar weakened on Thursday after the release of negative data, especially in the employment sector ignited speculation the Fed might delay hiking interest rates.

    Initial Jobless Claims came out at 295k, which was higher than the 294k previously; investors had been expecting a fall to 284k.

    Continuing Claims also came out higher-than-expected at 2325k versus the 2275k previously and the 2290k forecast.

    Other data was also not very strong – increasing investor expectations the Fed might delay, particularly as most FOMC members have emphasised the decision will be dictated by data.

    Preliminary estimates of Manufacturing activity in April came out at 54.2 versus the 55.7 estimated.

    New Home Sales in March fell by -11.5% from 5.6% in the previous month and much lower than the -4.5% expected.

    EUR

    The euro strengthened on Thursday – but more because it was the ‘least ugly’ of the majors rather than due to data, which was poor.

    The overall outlook for the region remains better than previously, however, which probably provided some underpinning support for the currency.

    Manufacturing and Services activity in the euro-zone fell in March, with Composite PMI coming out at 53.5 according to preliminary estimates, from 54.0 previously, when a rise to 54.5 had been forecast. Manufacturing alone fell to 51.9 from 52.2 and Services to 53.7 from 54.2 – these falls were reflected in all 3 of the largest economies in the euro-zone on an individual basis as well.

    The euro may have been aided by reports that the most recent meeting between Merkel and Tsipras over the Greek financial crisis had shown “progress.”

    GBP

    The pound mostly rose on Thursday, but more due to dollar weakness than its own drivers as data came out almost entirely lower-than-expected.

    Public Sector net Borrowing in March showed the government having to borrow a higher amount to meet its commitments; coming out at 6.7bn from 6.5bn expected; it was also higher than the 4.8bn previous result.

    The negative monthly result may have been offset, however, by preliminary estimates for the 2015 financial year, which showed public sector net borrowing for the whole year was 11.1bn lower compared to 2014, resulting in a figure of 87.3bn.

    The Budget Deficit for 2015 was 5.2bn lower than for 2014, and this was despite the loss of 20bn in profits paid to the exchequer from the BOE’s Asset Purchase Fund.

    Retail Sales data showed a fall of -0.5% mom both with and without cars included. This was substantially lower than the 0.6% of the previous month and 0.4 and 0.5% expected
    respectively.

    Year-on-year, Retail Sales continued to show growth, albeit at a moderated rate of 4.2% for both cars and not, which was lower than the 5.4 and 4.8% previously and the 5.4% and 5.5% expected.

    JPY

    The yen traded mixed – rising above the dollar but falling against the pound and the euro.

    Early morning data indicated the preliminary manufacturing PMI in Japan fell to 49.70 in April, following the previous month’s level of 50.30, while market expectations were for it to rise to 50.70.

    A BOJ official reported today that consumer sentiment was improving gradually and that the effects of last year’s sales tax hike appeared to be subsiding.

    Governor Kuroda commented today in parliament that a policy response will be necessary if oil price moves have second-round effects such as changing inflation expectations or firms’ price setting behaviour.

    Contrary to reports from the Nikkei yesterday the Governor said that the 2.0% inflation target was likely to be reached in FY 2015, however adding the oil price qualification.

    Going forward investors will be keeping a close eye on BOJ’s Deputy Governor’s Hiroshi Nakaro’s speech scheduled for Friday.

    USD

    The dollar weakened on Thursday after the release of negative data, especially in the employment sector ignited speculation the Fed might delay hiking interest rates.

    Initial Jobless Claims came out at 295k, which was higher than the 294k previously; investors had been expecting a fall to 284k.

    Continuing Claims also came out higher-than-expected at 2325k versus the 2275k previously and the 2290k forecast.

    Other data was also not very strong – increasing investor expectations the Fed might delay, particularly as most FOMC members have emphasised the decision will be dictated by data.

    Preliminary estimates of Manufacturing activity in April came out at 54.2 versus the 55.7 estimated.

    New Home Sales in March fell by -11.5% from 5.6% in the previous month and much lower than the -4.5% expected.

    EUR

    The euro strengthened on Thursday – but more because it was the ‘least ugly’ of the majors rather than due to data, which was poor.

    The overall outlook for the region remains better than previously, however, which probably provided some underpinning support for the currency.

    Manufacturing and Services activity in the euro-zone fell in March, with Composite PMI coming out at 53.5 according to preliminary estimates, from 54.0 previously, when a rise to 54.5 had been forecast. Manufacturing alone fell to 51.9 from 52.2 and Services to 53.7 from 54.2 – these falls were reflected in all 3 of the largest economies in the euro-zone on an individual basis as well.

    The euro may have been aided by reports that the most recent meeting between Merkel and Tsipras over the Greek financial crisis had shown “progress.”

    GBP

    The pound mostly rose on Thursday, but more due to dollar weakness than its own drivers as data came out almost entirely lower-than-expected.

    Public Sector net Borrowing in March showed the government having to borrow a higher amount to meet its commitments; coming out at 6.7bn from 6.5bn expected; it was also higher than the 4.8bn previous result.

    The negative monthly result may have been offset, however, by preliminary estimates for the 2015 financial year, which showed public sector net borrowing for the whole year was 11.1bn lower compared to 2014, resulting in a figure of 87.3bn.

    The Budget Deficit for 2015 was 5.2bn lower than for 2014, and this was despite the loss of 20bn in profits paid to the exchequer from the BOE’s Asset Purchase Fund.

    Retail Sales data showed a fall of -0.5% mom both with and without cars included. This was substantially lower than the 0.6% of the previous month and 0.4 and 0.5% expected
    respectively.

    Year-on-year, Retail Sales continued to show growth, albeit at a moderated rate of 4.2% for both cars and not, which was lower than the 5.4 and 4.8% previously and the 5.4% and 5.5% expected.

    JPY

    The yen traded mixed – rising above the dollar but falling against the pound and the euro.

    Early morning data indicated the preliminary manufacturing PMI in Japan fell to 49.70 in April, following the previous month’s level of 50.30, while market expectations were for it to rise to 50.70.

    A BOJ official reported today that consumer sentiment was improving gradually and that the effects of last year’s sales tax hike appeared to be subsiding.

    Governor Kuroda commented today in parliament that a policy response will be necessary if oil price moves have second-round effects such as changing inflation expectations or firms’ price setting behaviour.

    Contrary to reports from the Nikkei yesterday the Governor said that the 2.0% inflation target was likely to be reached in FY 2015, however adding the oil price qualification.

    Going forward investors will be keeping a close eye on BOJ’s Deputy Governor’s Hiroshi Nakaro’s speech scheduled for Friday.


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