The pullback in the US dollar and the recovery in the euro were not driven by improved market conditions but rather by disappointment in the US data temporarily overshadowing the Eurozone situation. Financial markets remained pressured in Asian session on Friday as China's manufacturing data indicted deterioration in the world's second largest economy. In the commodity sector, the front-month contract for WTI crude oil fell for a third consecutive day and settled at 76.53, down -1.47%, while the equivalent Brent crude contract.

The latest poll in Greece showed that the pro-bailout New Democracy party is leading the anti-bailout Syriza party by 1.6-2.8% while the MARC poll signaled that New Democracy led the Syriza by 1.8%. The survey also showed that a net 74% of respondents preferred Greece to remain in the Eurozone. In Spain, the latest banking data showed a net capital outflow of 66.2B euro last month, the most since records began in 1990. Meanwhile, there were reports that the IMF is considering providing a loan to Spain for the bailout of Bankia. However, the IMF managing director Christine Largarde denied and stated that there is no such plan and the lender had not received any request to that effect. As the debt crisis worsened, appeal of the euro has lost dramatically, triggering the EU and the ECB's warning that the single currency is at risk.

The ongoing turmoil has weighed on the euro and other risky assets. In turn, the greenback, viewed as a safe haven, strengthened. However, the US dollar lost ground after weak dataflow. The US GDP expanded +1.9% in 1Q12, compared with the first estimate of +2.25. The downward revision was driven by consumption, net exports, government spending and inventory. Concerning the job market, the ADP reported addition of payrolls by +133K in May, compared with the downward revision of +113K in April. The market had, however, anticipated a +1.35K increase. Initial jobless claims surprisingly climbed to 383K in the week ended May 26 from 373K in the prior week. The 4-week moving average also rose +4K to 375K. Meanwhile, Chicago PMI slipped -3.5 points to 52.7 in May. This was the lowest reading since September 2009. The next focus would be on the May employment data due today. The market forecast a rise in non-farm payrolls of +150K in May from 115K a month ago. The unemployment rate probably stayed unchanged at 8.1%. The ISM manufacturing is expected to have slid -0.8 points to 54 in May.

A number of countries would report PMI data today. Besides the US ISM data which probably dropped in May, China, the world's second largest economy, reported its official PMI as 50.4 in May, down from 53.3 in April and consensus of 52. The data compiled by HSBC and Markit showed the country's manufacturing activities continued to contraction last month. This probably increased the call for further stimulus from the Chinese government.