Overall: Heading into Thursday’s U.S. session, the setup was eerily similar to what we saw on Wednesday, a period of consolidation ahead of important economic releases, and although the unemployment claims was worse than expected, as was Wednesday’s retail sales, the dollar moved in the opposite direction. The reason was the reaction in the equity market. After opening the session much lower, U.S. equities rebounded on better than expected earnings and the dollar weakened in the broad market. Once again, the equity markets dictated the direction of the greenback. The turnaround today was abrupt, as the market continues to be more comfortable in risk tolerance mode, and the overall direction of the dollar is lower as traders shun the U.S. currency as a safe haven.

U.S. jobless claims increased last week, rising 32,000 to 637,000, according to the Labor department. Economists had expected a slight increase to 610,000 from the prior week’s 601,000 read. The total number of people collecting unemployment insurance has surged to 6.56 million. Producer prices in the U.S. rose in April by 0.3%, more than the 0.2% increase expected.

The Euro (Eur/Usd) The euro traded higher during last night’s Asian session but traded sideways during the European session as traders awaited the economic releases. After falling in reaction to the news and lower equities, the pair rebounded as equity markets shed losses and moved higher. On the day, the euro gained approximately 55 pips.
The Pound (Gbp/Usd) Cable rebounded on Thursday as the dollar weakened and traders put Wednesday’s BOE inflation report on the back burner and became more risk tolerant. The pair traded sideways during the overnight sessions before dropping immediately after the PPI and jobless reports and then rebounding as equities moved higher. On the day, the pair gained almost 100 pips and closed near the 1.5250 level.

The Aussie (Aud/Usd) Higher equity and commodity markets helped strengthen the Australian dollar on Thursday. The pair moved in a similar range to that seen on Wednesday and closed higher by approximately 80 pips, above the 0.7600 level. There were no Australian economic releases last night and none scheduled for tonight’s Asian session which means a possible carry-over from today’s U.S. equity markets into the Asian markets could see the pair continue to strengthen overnight.

The Cad (Usd/Cad) The cad weakened slightly on Thursday as the Canadian dollar benefitted from higher equities and commodity prices. The pair traded in a range of approximately 100 pips and closed lower by just 40 pips. Equity markets managed to hold on and close in positive territory and oil prices moved higher by 0.53 but closed below the $60 level that was hit earlier in the week. There were no Canadian economic releases on Thursday and only the mid-tier manufacturing sales data is scheduled for release tomorrow.

The Swissy (Usd/Chf) The pair traded in a range of approximately 100 pips on Thursday and closed the day lower by 30 pips. The Swiss producer price index declined in April from the prior month by 0.2%, much worse than the 0.6% gain that was expected. April was the ninth consecutive month that the inflation rate has slowed, dragged lower by declines in the energy market.

The Yen (Usd/Jpy) For the first time this week, the dollar strengthened against the Japanese yen as equity markets staged a rally and traders moved out of the Japanese currency. Recently we have seen the dollar get sold against the Japanese yen even on positive equity days but Thursday saw the pair run into the 100 day simple moving average which held as support and bounced the pair higher. The pair gained 50 pips on the day and closed near the 95.75 level. Japanese core machinery orders and CGPI data will be released tonight but neither are top-tier releases.