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Dollar falls despite better jobless claims as inflation expectations drag

USD

The dollar weakened on Thursday after a fall in Producer Prices weighed on inflation expectations and overshadowed employment data, which came out better-than-expected.

Factory Gate Prices fell -0.4% mom in April compared to the 0.1% rise expected, and well below March’s 0.2%. Year-on-year Producer Prices fell -1.3% from -0.8% a year ago when no-change had been forecast.

The slow-down would have weighed on inflation expectations as Producer Prices filter through to broader inflation. This in turn could lead to a delay in the Fed voting for a tightening in monetary policy. PPI Ex Food and Energy also slid below expectations and was negative mom.

Employment data showed a fall in Initial Jobless Claims of 1k to 264k when it had been estimated to rise 10k, yet despite defying pessimistic expectations failed to propel the dollar significantly higher. Continuing Claims remained unchanged when they had been forecast to rise by 4k.

EUR

The euro strengthened on Thursday as the global bond rout continued with emphasis on German 10-year benchmark bond yields, which spiked even higher.

The global sell-off in bonds has been put down to higher inflation expectations and a better outlook for the world economy. However, there is also a sense that a bubble has burst which was blown up by central bank action to buy bonds via QE programmes, the latest of which was initiated recently by the ECB and led to a rapid rise in euro-area bonds.

The euro stalled later in the day after ECB president Draghi said that the ECB would still be implementing its QE programme in full when investors had started to speculate the ECB might curtail its bond-buying in light of rout in the asset class.

GBP

The pound rose versus most counterparts on Thursday but lost ground as the day progressed and ended it mostly only just ahead.

The most recent piece of data was positive for the U.K economy and the pound after it showed a higher proportion of Surveyors thought house prices were rising according to data from the Royal Institute of Surveyors published Wednesday night.

On a day when there was no hard data out traders took their cues from commentary, as BOE governor Mark Carney gave a radio interview. They interpreted his comments as broadly positive after he said that weak productivity would probably pick up and the next move by the BOE would be a rate hike, probably within a year’s time.

JPY

The yen traded on a weaker footing on Thursday trading at 119.14 per dollar in the New York session.

The Bank of Japan, said that the M2 money stock in Japan was up 3.6% yoy in April, coming in at 904.2 tn yen. That was in line with expectations and unchanged from the previous month.

The M3 money stock was up an annual 3.0% to 1,219.2tn yen also matching expectations and unchanged from the March reading.

Japan had a 2.8 tn yen excess in its broadest measure of trade, the Finance Ministry reported on Wednesday. The result was wider than the median estimate of 2.1 tn yen in a Bloomberg survey of economists.

USD

The dollar weakened on Thursday after a fall in Producer Prices weighed on inflation expectations and overshadowed employment data, which came out better-than-expected.

Factory Gate Prices fell -0.4% mom in April compared to the 0.1% rise expected, and well below March’s 0.2%. Year-on-year Producer Prices fell -1.3% from -0.8% a year ago when no-change had been forecast.

The slow-down would have weighed on inflation expectations as Producer Prices filter through to broader inflation. This in turn could lead to a delay in the Fed voting for a tightening in monetary policy. PPI Ex Food and Energy also slid below expectations and was negative mom.

Employment data showed a fall in Initial Jobless Claims of 1k to 264k when it had been estimated to rise 10k, yet despite defying pessimistic expectations failed to propel the dollar significantly higher. Continuing Claims remained unchanged when they had been forecast to rise by 4k.

EUR

The euro strengthened on Thursday as the global bond rout continued with emphasis on German 10-year benchmark bond yields, which spiked even higher.

The global sell-off in bonds has been put down to higher inflation expectations and a better outlook for the world economy. However, there is also a sense that a bubble has burst which was blown up by central bank action to buy bonds via QE programmes, the latest of which was initiated recently by the ECB and led to a rapid rise in euro-area bonds.

The euro stalled later in the day after ECB president Draghi said that the ECB would still be implementing its QE programme in full when investors had started to speculate the ECB might curtail its bond-buying in light of rout in the asset class.

GBP

The pound rose versus most counterparts on Thursday but lost ground as the day progressed and ended it mostly only just ahead.

The most recent piece of data was positive for the U.K economy and the pound after it showed a higher proportion of Surveyors thought house prices were rising according to data from the Royal Institute of Surveyors published Wednesday night.

On a day when there was no hard data out traders took their cues from commentary, as BOE governor Mark Carney gave a radio interview. They interpreted his comments as broadly positive after he said that weak productivity would probably pick up and the next move by the BOE would be a rate hike, probably within a year’s time.

JPY

The yen traded on a weaker footing on Thursday trading at 119.14 per dollar in the New York session.

The Bank of Japan, said that the M2 money stock in Japan was up 3.6% yoy in April, coming in at 904.2 tn yen. That was in line with expectations and unchanged from the previous month.

The M3 money stock was up an annual 3.0% to 1,219.2tn yen also matching expectations and unchanged from the March reading.

Japan had a 2.8 tn yen excess in its broadest measure of trade, the Finance Ministry reported on Wednesday. The result was wider than the median estimate of 2.1 tn yen in a Bloomberg survey of economists.



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