EUR/USD
The euro fell to three month lows against the broadly stronger dollar on Friday after data showing that German business sentiment deteriorated in May added to expectations for easing by the European Central Bank at its upcoming June meeting. The drop in the euro came after a report showed that the German IFO business climate index declined to 110.4 in May; the lowest reading this year, from 111.2 in April, indicating that economic activity could slow in coming months. The data came one day after a report showing that manufacturing activity in the eurozone expanded at the slowest rate in six months in May. Recent comments by senior ECB officials have signaled that the bank is open to acting as soon as June to stop inflation in the currency bloc from falling too low. On Thursday, ECB Governing Council member Jens Weidmann said the bank is prepared to take unconventional measures to counter the risks of low inflation in the euro zone. The dollar was boosted after data on new home sales added to signs of a recovery in the housing market. The Commerce Department reported that sales of new homes rose by a larger-than-expected 6.4% to 433,000 in April, after two months of decline. Analysts had been expecting a figure of 425,000. March's number was revised up from 384,000 to 407,000.
GBP/USD
The pound was lower against the broadly stronger dollar on Friday after U.S. housing data topped expectations, adding to optimism that the economic recovery in the U.S. is gaining traction. The dollar was boosted after the Commerce Department reported that sales of new homes rose by a larger-than-expected 6.4% to 433,000 in April, after two months of declines. Analysts had been expecting a figure of 425,000. March's number was revised up from 384,000 to 407,000. Elsewhere, sterling rose to its highest level in 17 months against the euro after weak German business sentiment data underlined expectations that the European Central Bank will ease monetary policy at its next meeting in June. The drop in the euro came after a report showed that the German IFO business climate index declined to 110.4 in May; the lowest reading this year, from 111.2 in April, indicating that economic activity could slow in coming months. The data came one day after a report showing that manufacturing activity in the euro zone expanded at the slowest rate in six months in May.
USD/JPY
The dollar rose to more than one-week highs against the yen on Friday as upbeat data on U.S. new home sales added to signs of a recovery in the housing market. The dollar was boosted after the Commerce Department reported that sales of new homes rose by a larger-than-expected 6.4% to 433,000 in April, after two months of decline. Analysts had been expecting a figure of 425,000. March's number was revised up from 384,000 to 407,000. The dollar fell to three-and-a-half month lows against the yen on Wednesday as expectations for more stimulus by the Bank of Japan diminished, while declines in U.S. Treasury yields also pressured the dollar lower. At the conclusion of its two-day policy meeting, the BoJ said its stimulus program has been working as intended and that the economy is showing signs of weathering the impact of a sales tax increase that came into effect on April 1.
USD/CAD
The U.S. dollar ended Friday’s session lower against the Canadian dollar after data showing that Canadian inflation rose in line with expectations in April. The Canadian dollar was boosted after Statistics Canada reported that the annual rate of inflation rose to the central bank’s target of 2% for the first time in in two years in April, up from 1.5% the previous month. The annual core rate, which excludes volatile elements such as some food and energy prices, rose 1.4%, as expected. Canadian consumer prices rose 0.3% in April from a month earlier, also in line with forecasts. The data sparked expectations that the Bank of Canada could tone down its view on 'downside risks to inflation', possibly as soon as its next rate review in June. In the U.S., upbeat new home sales data added to signs of a recovery in the housing market.
