Dollar weaker amid soft data, Fed speakers

The dollar was weaker amid disappointing U.S. economic data and dovish Fed speakers. NY Fed President Dudley and Chicago Fed President Evans – both known doves and FOMC voters – were on the wires today. Dudley noted ‘slow progress’ and indicated he sees ‘considerable way’ before the Fed meets its dual mandate while Evans said he expects accommodative policy to continue through 2011. USD/JPY fell to current levels of around 81.50 despite data confirming Japan has fallen back into a recession and EUR/USD rose above the 1.4300 figure as on the back of a declining buck. Swiss Economy Minister Schneider-Amman noted concern over the strength of the franc and also said that the government and the SNB is monitoring the situation and may take ‘appropriate’ FX measures. He also acknowledged the Swiss ability to influence FX is limited. The franc was slightly firmer against the greenback but was lower against the euro with EUR/CHF climbing to current levels of about 1.2600.

U.S. labor data showed weekly initial claims coming in lower than the forecast of 420K with a print of 409K which was down from the prior week’s 438K. As noted by NY Fed President Dudley in a speech today, the Fed is ‘having a difficult time’ promoting job growth to fulfill its mandate of full employment. Housing data continued to disappoint with April existing home sales unexpectedly falling by -0.8% m/m to 5.05M from the prior 5.09M. The forecast was for a gain of +2.0% and a reading of 5.20M. Leading indicators were also lower than expected at -0.3% (cons. +0.1% prior +0.7%). The Philadelphia Fed index was also released today and the number was significantly lower than the market forecast of 20.0 with a print of 3.9 (prior 18.5).

U.S. equities were choppy throughout the day but finished in positive territory with the Dow Jones Industrial Average climbing higher by about +0.36% and the S&P 500 advancing by around +0.21%. Commodities were lower on the day with a decline in oil of roughly -1.62%. The precious metals gold and silver were softer by about -0.22% and -0.36% respectively. U.S. 10-year Treasury yields edged lower by about 1 basis point to around 3.17%.

On the data front for the upcoming Asia/Pacific session is the start of the 2-day Bank of Japan meeting, Japan March All Industry Activity Index, April convenience store sales, New Zealand April credit card spending and due out of Australia is April RBA foreign exchange transaction data.

Source: Forex.com

19.05.2011