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The Euro has started to consolidate its losses from yesterday despite a unexpected drop in April's industrial new orders which fell for a ninth month by 1.0% versus expectations of 0.0%.

Talking Points
• Japanese Yen: Testing 96.50
• Pound: Continues To Negatively Impacted From King Comments
• Euro: Industrial New Orders Falls For Ninth Month
• US Dollar: GDP Initial Jobless Claims On Tap

Euro Choppy Despite Drop In Industrial New Orders, Pound Remains Under Pressure After Dovish King Comments.

The Euro has started to consolidate its losses from yesterday despite a unexpected drop in April's industrial new orders which fell for a ninth month by 1.0% versus expectations of 0.0%. Activity decline 35.5% from a year ago as the economy continues to be hurt by slumping global demand. Positive data from Italy which isn't typically market moving, but considering the country was one of the first to fell the impact of the downturn could be a sign things are bottoming. A rise in exports by 0.5% in May turned a trade balance deficit into a surplus of 555.0 million. This translated into Italian business confidence rising to 98.5 which was the highest in eight months.

A 2.4% drop in capital goods which includes new buildings and machinery led the decline in demand which could limit future economic growth. The lack of investment in new projects will make it difficult for companies to generate above average returns and will limit profits and hiring going forward. The OECD called for the ECB to cut rates as they see rising unemployment as a hindrance of future growth for the economy. We don't expect the ECB to lower rates below 1.0% as they have insisted that it is the floor for their easing, which could limit the scope of the recovery for the 16-member union. The Euro reached as low as 1.3904 before finding support as the EUR/USD appears that it might settle back into its recent range between the 20-Day SMA at 1.4012 and 1.3783-the 38.2% Fibo level of 1.2884-1.4340.

The Pound has come under pressure as dovish comments from BoE governor Mervyn King yesterday continues to impact price action. The central bank leader said that I feel more uncertain now than ever. This is a pattern of recession that we've not seen since the 1930s, and that an economic recovery could still be a long, hard slog despite encouraging data recently. Yesterday, we warned of a sharp reversal in the Sterling and we it continues today after peaking at 1.6596 the GBP/USD has fallen below 1.6300. The break below the 20-Day SMA at 1.6346 could lead to more losses with 1.600 as the next likely support level.

Dollar was mixed overnight as we have started to see it consolidate its gains from yesterday derived from the FOMC rate decision. The central bank squashed any ideas that they would add to their bond purchase program. Policy makers also continued their view that inflation would remain subdued for sometime, which should limit speculation about future rate hikes which could lead to a dollar neutral stance from investors. The final U.S. GDP reading for the fist quarter is due to cross the wires unchanged from the preliminary print of -5.7%. An upward revision would raise speculation for future growth for the U.S. economy and based on the bullish price action from yesterday we continues dollar support. An inline print would leave initial jobless claims as the main driver of price action on the economic calendar. A drop below the forecasted 600K could ease concerns that rising unemployment will limit any potential recovery and add to greenback bullish sentiment.

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To discuss this report contact John Rivera Currency Analyst: jrivera@fxcm.com