- The dollar and yen reversed overnight gains as US stocks advanced on Thursday. US initial jobless claims rose more than expected on large layoffs in the auto sector, while producer prices increased modestly. The S&P 500 rose 9.15 points to 893.07. The yen fell for the first time in four days as the higher US stocks improved risk sentiment. The euro rose on European Central Bank Governing Council member Ewald Nowotny's assessment that interest rates are at appropriate levels. Improved risk appetite lifted the pound and commodity currencies. The Swiss franc rose despite more signs of deflation and warnings from Swiss National Bank Governing Board member Thomas Jordan that the SNB aims to prevent a further franc appreciation.
- The dollar index fell on Thursday. In a topping formation, the index is testing support from the uptrend. If this support at the 82 handle is broken, the dollar index may fall to 80.
Financial and Economic News and Comments
US & Canada
- US producer prices increased a slightly more-than-expected 0.3% m/m in April after a 1.2% m/m decline in March, according to PPI data from the Labor Department. The April PPI increase was mainly due to a 1.5% m/m rise in food costs. Energy prices declined 0.1% m/m. Due to large declines late last year, the April PPI fell 3.7% y/y, as expected, after a 3.5% y/y decrease in March. The core PPI, which excludes food and energy, increased 0.1% m/m in April, as forecast, after being unchanged in March. The core PPI rate increased at 3.4% y/y, as expected, decelerating from March's 3.8% y/y.
- US initial jobless claims increased a more-than-expected 32,000 to 637,000 in the week ending May 9, driven by filings in car-industry states, after the prior week's upwardly revised 605,000, data from the Labor Department showed. The 4-week average of new jobless claims increased 6,000 to 630,500. Continuing claims in the week ending May 2 climbed a more-than-estimated 202,000 to 6,560,000, the highest level since records began in 1967, following the preceding week's upwardly revised 6,358,000. The insured unemployment rate rose to 4.9% from 4.8%.
- Switzerland's producer and import prices weakened for a ninth straight month in April, unexpectedly declining 0.2% m/m, after March's 0.5% m/m decrease, data from the Swiss Federal Statistical Office showed. Producer and import prices fell 3.6% y/y, the largest fall since1987, following March's 2.8% y/y slide.
- The Conference Board UK leading economic index fell for 17 consecutive months, falling 0.5% in March to 91.6, after a 0.6% decline in February, not signaling a near-term UK economic recovery, according to LEI data by the Conference Board. The coincident index, measuring current economic activity, was unchanged in March, after a 0.3% decrease in February.
- According to the latest ECB Survey of Professional Forecasters (SPF) published in the ECB May 2009 Monthly Bulletin, inflation expectations for 2009 and 2010 have been revised downwards to 0.5% and 1.3% respectively. SPF respondents have lowered their growth expectations for 2009, expecting eurozone GDP to contract 3.4% in 2009. Growth expectations for 2010 have also been revised downwards to stand at 0.2%. Meanwhile, unemployment rate expectations have been revised upwards to reach 9.3% in 2009 and 10.5% in 2010.
- No major economic data were released today.
FX Strategy Update