The hawkish tone from Fed Chairman Bernanke will continue to provide some degree of short-term dollar support

The dollar consolidated around the 1.5450 region against the Euro for much of the day. The US data was again generally stronger than expected which provided some background support for the currency.

The ADP report recorded a private-sector employment increase of 40,000 for May after a revised 13,000 increase for April. In theory, this will increase optimism over the Friday payroll report, but there will be a strong sense of caution as the ADP report has consistently over-estimated employment gains over the past few months and markets will still be expecting an official decline in jobs in Friday’s data.

The PMI report for the non-manufacturing sector was little changed at 51.7 in May from 52.0 previously and, crucially, remained above the 50.0 level. The orders and prices components were stronger, but the employment index was weaker. The data overall should maintain a more optimistic tone towards the economy.

Fed Chairman Bernanke also delivered a hawkish stance with comments that inflation was significantly higher than the Fed wants. Following comments on the dollar yesterday, this stance will tend to underpin the currency with expectations of higher interest rates and it edged stronger as oil prices fell. The dollar tested levels below 1.54 in Europe on Thursday ahead of the ECB interest rate decision