The forex markets are generally staying in consolidation as traders prepare for a busy day ahead. Japanese yen weakens mildly after following rebound in Asia stocks but the depth of the retreat is so far shallow. Yen crosses are still broadly lower from weekly point of view with AUD/JPY and NZD/JPY dropping more than 3% so far. Similarly, dollar is also bounded in tight range against major currencies in general. The developments suggest that some more sideway trading will likely be seen in near term.
Events in UK will be the main focus in the European session today. The number of UK claimants is expected to have risen 55K in May, a figure lower than 57.1K in April, 65.5K in March and 136.6K in February. Recent decline in the increase in claimant counts signaled the job market in the UK may have improved. However, unemployment rates remained on the rise with claimants count rate probably risen to 4.8% in May from 4.7% a month ago while ILO unemployment rate might have risen to 7.3% in April from 7.1% in the prior month. BoE minutes will be released today but is unlikely to reveal much new information. Though focus will be on any discussion and possibility to expand the current quantitative easing programs. Other data include Swiss ZEW and Eurozone trade balance.
US CPI is expected to have risen +0.3% mom (-0.9% yoy) in May as driven by rally in retail gasoline price. Gasoline price has surged 10.6% in May and after seasonal adjustment, the gasoline component of CPI should have risen 4%. Other components remained soft but the pace of decline probably slowed down. Core CPI is anticipated to have eased to +0.1% mom (+1.8% yoy) from +0.3% mom(+1.9%) in April as spike in the tobacco component which was boosted by federal excise tax disappeared.
After much speculations, the BRIC summit delivered little surprise to the markets. The statement called for a stable, predictable and more diversified currency system, and emerging economies to have “greater voice and representation in international financial institutions. However, there is no mentioning of the possibility of lessening of dollar's influence, nor anything about investing BRIC's reserve in each other's bond.
Looking at the dollar index, consolidation from 81.36 is still in progress and at this point, some more pull back cannot be ruled out. But downside is expected to be contained by 79.19 support and bring rally resumption. We're still favoring the case that whole decline from 89.62 has completed at 78.33 already. Above 81.36 will bring rise resumption to key near term resistance of 82.63 (38.2% retracement of 89.62 to 78.93 at 82.64) to confirm this case.