The U.S. Dollar rebounded on Thursday versus the Yen and advanced against many of the majors when it was bolstered by positive economic releases out of China indicating that the preliminary Chinese HSBC Manufacturing Index climbed to 49.7, touching the highest level in five months while coming close to 50 –the level which denotes growth. The FOMC minutes divulged that the monetary authorities believe that the economy advanced at a slow pace and intend to keep the interest rate at the current low for a while after winding down the bond-purchasing program. The greenback was supported by speculation that the Fed will boost the key cash rate before the European Central Bank and the Bank of Japan, and by a rebound in Treasury yields. On the data front, the Labor Department announced that the number of individuals who filed for Unemployment Benefits rose by 28,000 to 326,000 in the last week, while economists anticipated a hike of 12,000 to 310,000. Gold Prices went up before the U.S. issued a line-up of reports. Prices had dipped to the lowest rate in eight days as the markets awaited clues from the Federal Reserve on the future of U.S. monetary policy. Contracts for June delivery rallied 0.56 percent and traded at $1,295.30 a troy ounce on the Comex during the European market hours. Gold for August delivery climbed 0.8, touching $1,298 a troy ounce in the morning hours in New York. Analysts believe that with tension increasing between Moscow and Kiev, and persisting worries that Russia could interfere in the upcoming general elections in the Ukraine, the shiny metal could extend its gains. The precious commodity could also benefit from the fact that India eased import limits. Bachhraj Bamalwa, the Director of the All India Gems & Jewelry Trade Federation, stated that the government would allow companies to purchase more gold from abroad.
The Euro advanced versus the U.S. Dollar but fell against the majority of its Forex peers after Markit Economics revealed that the E.U.’s Composite Purchasing Manager’s Index posted at 53.9 this month, just as predicted. The gauge which measures Factory Output dropped more than expected, but activities in the Services climbed to the highest level in 35 months. The Euro was supported by signs of economic improvement, even though manufacturing activity rose at the slowest pace in half a year. Germany revealed that its private sectors expanded, but France told a different story by revealing that the private sector went back into contraction territory. The British Pound depreciated for the first time in almost one week against the greenback subsequent to an announcement showing that Gross Domestic Product came in at the level forecast by economists, while the U.K.’s Deficit was larger in April than anticipated. The Sterling fell against the majority of its counterparts on speculation that the Bank of England could still consider boosting the benchmark interest rate sooner than planned.
The Yen fell against the U.S. Dollar as China’s macroeconomic fundamentals signaled growth. The Japanese currency weakened on Wednesday versus all of its Forex counterparts after Asian stocks rallied; but an improvement for China’s economic outlook bolstered sentiment throughout the markets, which is why the Yen rose on Thursday but then dipped shortly thereafter.
Lastly, in the South Pacific, the Australian Dollar inched higher versus the greenback following the announcement of metrics out of China, its main trade partner, indicating a hike in Manufacturing activities, and on domestic releases showing that Inflation forecasts rose in April. New Zealand’s Dollar was more or less changed against the U.S. currency after data on Inflation Expectations climbed 2.4 percent in the initial three months of the year, after coming in at 2.3 percent in the final quarter of 2013. The Kiwi was also supported by Chinese releases signaling slow but steady progress for Manufacturing.
EUR/USD - Euro-Zone Signals Some Improvement
The EUR/USD climbed on Thursday after the Euro region issued a series of economic reports indicating that the area’s Composite Purchasing Manager’s Index printed at 53.9 this month, which was in line with forecasts. However, the index which measures Factory Output fell more than expected. According to Markit Economics, the E.U.’s Flash Manufacturing PMI slipped to 52.5 in May after coming in at 53.4 in April. The region’s Services PMI jumped from 53.1 to 53.5, the highest in almost three years, while economists had anticipated it would fall to 53.0. The announcements revealed that production rose for an eleventh consecutive month, while employment surged at the quickest pace since 2011. Germany reported that its Manufacturing PMI read at 52.9 in May, while in April it posted at 54.1, while the Services PMI rose from 54.7 to 56.4. France, on the other hand, announced that its Manufacturing PMI dipped from 51.2 to 49.3, which was the lowest in three months; Services PMI slipped from 50.4 to 49.2. The EUR/USD was weighed down by speculation that the European Central Bank could implement stimulus measures in June.
GBP/USD - GDP Disappoints
The GBP/USD slumped to a session low following news indicating that the U.K.’s economy expanded 0.8 percent in the initial quarter of 2014, disappointing speculators who expected it to post higher. And according to the Office for National Statistics, the yearly rate of economic expansion was 3.1 percent. The reports showed that growth was prompted by a 2.7 percent increase in business spending on a quarter over quarter basis. Household Spending climbed by 0.8 percent, while the government’s expenditures only rose by 0.1 percent.
EUR/JPY - Shared Currency Rebounds
The EUR/JPY climbed on Thursday as the Yen dipped following a big surge in bond purchases in April, which upset the financial markets. The Yen was also impacted by data out of China which signaled that the outlook for the Manufacturing sector improved, a factor that bolstered Asian equities and reduced demand for the Yen. An initial reading of Chinese Manufacturing PMI by HSBC Holdings Plc denoted that sector activity improved, causing the index to post at 49.7 for May, which was the highest in five months.
AUD/USD - Inflation Forecasts Rise
The AUD/USD climbed as domestic releases by the Melbourne Institute indicated that Inflation Forecasts for the coming year inched up to 4.4 percent in April, after posting at 4.2 percent a month prior. The AUD/USD was also supported by news out of China denoting improvement in Manufacturing, although the numbers remained within contraction territory. The signs of progress came from a hike in new orders and shipments abroad. The announcement also showed an easing in deflationary pressures and a hike in output prices for the first time in six months. However, the index which measures employment revealed a drop to 47.3 suggesting that the rise in consumer sentiment has not filtered through to the employment sector. Economists believe that some signs of destabilization were a result of the recently implemented mini-stimulus programs.
Today’s Outlook
Today’s economic calendar shows that the Euro region will issue the German Business Climate Index and the U.S. will report on New Home Sales.