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    European Session – Euro tests 1.14 as dollar stuck at one-month lows; Oil extends gains

    The euro climbed to a 4-week high of 1.1410 dollars in European trading on Wednesday as the dollar continued to be weighed by receding expectations of a near-term Fed rate hike. The dollar index, which measures the US dollar against a basket of currencies, fell to a one-month low of 93.43. Apart from dollar weakness, there was little else driving the single currency today with the only major European data coming out of the UK.

    UK manufacturing and industrial production data surprised on the upside with output surging in April. Manufacturing production jumped by 2.3% month-on-month in April, beating estimates of no change, to give a year-on-year rise of 0.8%. Overall industrial production also rose strongly, with output up 2.0% on the month and 1.6% on an annual basis. This compares with expectations of flat growth month-on-month and a drop of 0.4% year-on-year. The rebound was led by higher output in pharmaceuticals, cars and gas.

    The pound had declined to 1.4499 dollars ahead of the data but steadily climbed to 1.4599 dollars in afternoon European trading before easing to 1.4546 in late session. Sterling’s gains were held back by the uncertainty surrounding the outcome of the UK’s EU in or out referendum in just over two weeks’ time.

    German 10-year government bund yields dropped to a record low of 0.033% today as uncertainties over the slowing US jobs market and its implications on Fed policy, as well as the Brexit referendum in the UK drove investors to safe havens. German bunds were also boosted by the start of the ECB’s corporate bond program today.

    The US dollar meanwhile was hovering around the 107 yen level for much of the day but dipped to a low of 106.62 yen in late European session. The dollar has been unable to rebound from last Friday’s disappointing jobs report after Fed Chair Yellen failed to signal any timing for when the next rate rise will come.

    Stronger-than-expected job openings from the JOLTS survey failed to provide any support to the greenback. According to the survey, US job openings in April increased to 5.788 million from a downwardly revised 5.670 million in March. Expectations were for a reading of 5.672 million.

    The Canadian dollar continued its sharp gains against the greenback for a fourth day on the back of rising commodity prices. The US dollar fell to a fresh 5-week low of 1.2654 versus the loonie in European trading today. The loonie ignored worse-than-expected housing starts and building permits in April as higher crude oil prices were a stronger drive for the currency.

    Crude oil prices were up over 1.5% in late European session as ongoing supply disruptions to Nigerian facilities by militant attacks put upwards pressure on prices. Brent crude rose to an 8-month high of $52.47 a barrel, while US crude climbed to an 11-month high of $51.27 a barrel.

    However, prices fell back slightly following the release of the latest inventories data from the US Department of Energy. Crude oil inventories fell by more than expected in the week ending June 3, but a surprise gain in distillate and gasoline stocks weighed on prices.

    Gold was also bullish on Wednesday as it rose to a 3-week high of $1263.81 an ounce.

    In other currencies, the Australian and New Zealand dollar continued their advance against the greenback to reach fresh one-month highs of 0.7481 and 0.7022 respectively. The kiwi is likely to stay in focus as the Reserve Bank of New Zealand meets tomorrow for its latest rate decision.

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