The US dollar managed to hold its ground after losing some momentum against the euro after the release of the second estimate of Q1 2010 GDP came in below expectations at 3.0 percent. In other news, US jobless claims decreased to 4,607 from 4,656 for the week ending May 15. Look for the dollar to hold close to current levels ahead of thin trading conditions with the US Memorial Holiday next Monday.
The euro remained stronger against the dollar after officials from China and Kuwait reiterated that they will continue to maintain currency reserves in the single currency. Look for the euro to hold onto today's gains as it tries to push higher as investors move back into riskier assets.
Sterling weakened coming off earlier highs after the release of British retail sales indicated a fall in May, dropping to -18. Also moving sterling were rumors that on June 7th shareholders will stop an attempted bid by Prudential for AIG's Asian unit. Look for the pound to hold close to current levels ahead of Monday's holiday in the UK.
The Japanese yen weakened against the dollar and euro as risk aversion subsided overnight. Traders will look for CPI, jobless rates and household spending data tomorrow for further direction into the USD/JPY currency pair, however, look for support at 91.03.
The Canadian dollar strengthened after investors moved into riskier assets and as oil pushed to $73 a barrel. Also pushing the loonie higher was renewed expectations that the Bank of Canada will resume its call for a rate hike on June 1. Look for USD/CAD to hold onto current gains as it tests its 200 day moving average of 1.0479.
The Australian and New Zealand dollars rebounded after China remarked that it will still hold on to its currency reserves in euro. In other news, Australia's first-quarter domestic capital expenditure fell 0.2 percent in March, lower than expectations for a rise of 2.5 percent. With improvement in risk sentiment and the Reserve Bank of New Zealand most likely getting set to raise rates next month, look for both the Aussie and Kiwi to hold onto current gains.
10-Year Treasury Note Yield: 3.329%
Dow Jones Industrial Average: 10,192.03 +217.50