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    Dollar falls after bad data starts to infect Q2 as well

    USD

    More poor data, even if it was of the beta variety, kept the dollar pressured on Friday.

    First came Empire State Manufacturing which undershot expectations, then Industrial Production, which sank -0.3% in April compared to a year ago, when it had been forecast to rise to 0.0%.
    There was also Manufacturing Production, which fell to 0.0% from 0.3% previously – crashing below the 0.2% figure expected.

    Michigan Consumer Sentiment data fell to a 7-month low of 88.6 from 95.9 in April when it had been expected to remain at 95.9.

    There is now a fear that the weak Q1 for the U.S economy could spill over into Q2 as negative data for April starts to pile up. Goldman Sachs added to this perception by down-grading their forecasts to -1.1% GDP in Q1 and 2.0% in Q2. As Adam Button of Liveforex.com has pointed out this would require 6.0% growth in Q’s 3 and 4 for growth to meet the 3.0% full-year target touted by Fed members in January.

    EUR

    The euro rose on a mixture of short-covering and continued improved outlook for the euro-area on Friday, after the S&P rating agency upgraded the outlook for Italy and revised up their growth forecasts for the county’s GDP.

    The positive Italian news continued to reinforce the view that the euro-zone economy is on the mend, dispelling fears about deflation. There has even been speculation the ECB might taper its QE bond programme, although comments recently from Mario Draghi that it would see the programme through to the full had ended that line speculation to a degree.

    Apart from that there was no hard data out on Friday and U.S data was poor weighing on the greenback and leading to another step higher in EUR/USD.

    GBP

    The pound weakened on Friday as initial gains melted away and the currency ended the day lower on all fronts.

    A robust set of Construction figures helped support the currency in the early stage of the day after Construction Output in March rose 1.6% in April from a year earlier and 3.9% mom from a minus figure of -0.2% in February.

    However, recent doveish commentary from BOE governor Carney may have told as the day progressed, weighing on the pound. The BOE revised down growth in its recent inflation report and the euphoria accompanying the Conservative government’s re-election last week now seems to have died out. Overall, however, the slowdown on Friday is probably more a pause in sterling’s up-trend than the start of something more significantly bearish.

    JPY

    The yen weakened early in the London session spiking above the 119.90’s per dollar and in now trading some 10 points above yesterdays close in the New York session.

    In a speech at the Yomiuri International Economic society, BOJ Governor Kuroda confirmed Japan was still only halfway to hit the inflation target, underscoring it is too early to discuss exiting the central bank’s QQE programme. He reiterated he had no intention of changing the bank’s pledge of achieving 2% inflation at the earliest date possible within a time frame of roughly two years.

    He saw no reason for further easing now, but the central bank will not hesitate to adjust monetary policy if needed. Kuroda emphasised that withdrawing of the BOJ’s stimulus measures depends on economic conditions, and when time comes for ending easing, the bank will conduct it in an appropriate manner.

    The Bank of Japan has been quiet of late as the lofty goals set by ‘Abenomics’ seem further out of reach as the Japanese economy has failed to achieve sustained growth. Despite Governor Kuroda’s comments, investors are unsure if the BOJ will move because in recent history the central bank has built a trend of patient comments and the a shock decision taking the market by surprise, as occured on the October 31.

    USD

    More poor data, even if it was of the beta variety, kept the dollar pressured on Friday.

    First came Empire State Manufacturing which undershot expectations, then Industrial Production, which sank -0.3% in April compared to a year ago, when it had been forecast to rise to 0.0%.
    There was also Manufacturing Production, which fell to 0.0% from 0.3% previously – crashing below the 0.2% figure expected.

    Michigan Consumer Sentiment data fell to a 7-month low of 88.6 from 95.9 in April when it had been expected to remain at 95.9.

    There is now a fear that the weak Q1 for the U.S economy could spill over into Q2 as negative data for April starts to pile up. Goldman Sachs added to this perception by down-grading their forecasts to -1.1% GDP in Q1 and 2.0% in Q2. As Adam Button of Liveforex.com has pointed out this would require 6.0% growth in Q’s 3 and 4 for growth to meet the 3.0% full-year target touted by Fed members in January.

    EUR

    The euro rose on a mixture of short-covering and continued improved outlook for the euro-area on Friday, after the S&P rating agency upgraded the outlook for Italy and revised up their growth forecasts for the county’s GDP.

    The positive Italian news continued to reinforce the view that the euro-zone economy is on the mend, dispelling fears about deflation. There has even been speculation the ECB might taper its QE bond programme, although comments recently from Mario Draghi that it would see the programme through to the full had ended that line speculation to a degree.

    Apart from that there was no hard data out on Friday and U.S data was poor weighing on the greenback and leading to another step higher in EUR/USD.

    GBP

    The pound weakened on Friday as initial gains melted away and the currency ended the day lower on all fronts.

    A robust set of Construction figures helped support the currency in the early stage of the day after Construction Output in March rose 1.6% in April from a year earlier and 3.9% mom from a minus figure of -0.2% in February.

    However, recent doveish commentary from BOE governor Carney may have told as the day progressed, weighing on the pound. The BOE revised down growth in its recent inflation report and the euphoria accompanying the Conservative government’s re-election last week now seems to have died out. Overall, however, the slowdown on Friday is probably more a pause in sterling’s up-trend than the start of something more significantly bearish.

    JPY

    The yen weakened early in the London session spiking above the 119.90’s per dollar and in now trading some 10 points above yesterdays close in the New York session.

    In a speech at the Yomiuri International Economic society, BOJ Governor Kuroda confirmed Japan was still only halfway to hit the inflation target, underscoring it is too early to discuss exiting the central bank’s QQE programme. He reiterated he had no intention of changing the bank’s pledge of achieving 2% inflation at the earliest date possible within a time frame of roughly two years.

    He saw no reason for further easing now, but the central bank will not hesitate to adjust monetary policy if needed. Kuroda emphasised that withdrawing of the BOJ’s stimulus measures depends on economic conditions, and when time comes for ending easing, the bank will conduct it in an appropriate manner.

    The Bank of Japan has been quiet of late as the lofty goals set by ‘Abenomics’ seem further out of reach as the Japanese economy has failed to achieve sustained growth. Despite Governor Kuroda’s comments, investors are unsure if the BOJ will move because in recent history the central bank has built a trend of patient comments and the a shock decision taking the market by surprise, as occured on the October 31.


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