Forex Daily Wrap: Major Pairs Buoyed, USD Staging Comeback

The USD-index began the session extending its losses after last night’s FOMC meeting despite the Fed failing to rule out a June hike with analysts all but discounting the likelihood of a rate hike next month. However, the greenback partially recovered all of its recent losses after a raft of positive data in the form of Chicago Purchasing Manager Index (Apr) M/M 52.3 vs. Exp. 50.0, and strong Jobs numbers halting the recent trend of weak data from the US. USD/JPY was the among the main benefactors from the strong US data while also holding onto gains heading into the European market close as the pair broke above 119.00. USD/JPY had earlier failed to consolidate the move higher after the BoJ stood pat on rates and cut their GDP and inflation forecasts.

Major pairs have been buoyed with EUR/USD higher by almost a point after being bolstered by German Unemployment Change (000's) (Apr) M/M -8k vs. Exp. -15K and stronger European yields given the recent selloff in the Bunds. However with the USD-index staging a comeback EUR/USD fell back below the 1.12 handle after earlier printing fresh 2 month highs. Political uncertainty continues to weigh on GBP/USD as the pair is down over a point despite the softer USD with the May 7th election edging ever so closer.

Elsewhere AUD/USD is the stand-out underperformer as market participants look forward to next weeks RBA rate decision with Sydney Morning Herald's Peter Martin expecting a cut from the RBA due to poor economic conditions and the stronger AUD, while the RBNZ kept rates on hold at 3.50% and downplayed the currency suggesting that if inflation does not pick up a rate cut may be on the horizon. Commodity linked currencies also saw a bout of weakness after gold broke below the psychological USD 1200 handle and broke its 50 DMA 1191.61 following the better than expected US data.


Looking ahead tomorrow’s economic slate provides Chinese, Japanese, Canadian, US Manufacturing PMI, Japanese Jobless rate, ISM Manufacturing Univ. of Michigan Sentiment, Fed’s Mester, Fed’s Williams.