The US dollar held its ground against the yen, but weakened against the euro after the release of the Reuters/Michigan Consumer Sentiment Index for May increased to 73.6 from April's reading of 73.3. In other news, the Chicago Purchasing Managers Index fell to 59.7 in May from 63.8 in April. Look for the dollar to remain range bound today with thin trading conditions ahead of the Memorial holiday weekend.
The euro strengthened against the dollar holding above a key support level as investors closed month end positions. Look for the euro to remain within a broad range of 1.2212 to 1.2511 before stabilizing. Even with market turmoil subsiding for the time being, concerns about the euro zone remain entrenched as the market will look towards a more formal restructuring of Greece.
Sterling rose to a two-week high due to month-end demand and despite British consumer confidence falling for the third month in a row to -21. Investors will look towards any additional news over 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 held close to yesterday's close after the release of disappointing inflation figures. The headline CPI fell to -1.2 percent, while the core figure dropped to -1.6 percent. Look for USD/JPY to hold close to its 200 day moving average of 91.45.
The Canadian dollar strengthened against the dollar as oil climbed to $75 a barrel. Look for USD/CAD to remain range bound ahead of the Bank of Canada's June 1 interest rate announcement. Expectations remain that the Bank of Canada will raise rates by 25 basis points.
The Australian and New Zealand dollars pushed higher as global markets digested China's comments that it will continue to hold its reserves in the euro currency. Look for the AUD to test its next resistance level at .8578 ahead of the Reserve Bank of Australia's (RBA) expected rate announcement on Tuesday, where RBA will most likely hold rates at 4.5 percent. Look for kiwi to test 0.6878 ahead of Monday's business confidence survey. Also the market will look towards the Reserve Bank of New Zealand's meeting on June 10, where a rate hike of 25 basis points is likely.
10-Year Treasury Note Yield: 3.301%
Dow Jones Industrial Average: 10,167.84 - 88.20