The dollar relinquished some of its earlier gains versus the majors, initially strengthening to 1.5463 against the euro before settling back near the 1.5550-region. The greenback also remains firm versus the yen, maintaining its gains above the 105-level near 3-month highs just beneath 105.80.

The economic data from the US was mixed today, which included PCE, personal consumption, personal income, Chicago PMI and the University of Michigan sentiment survey. April personal consumption declined to a flat reading versus 0.1% a month earlier, while the personal income report drifted lower to 0.2% from 0.3%. Inflation, according to the PCE index, held steady with the headline reading at 3.2% y/y and 0.2% m/m. The core PCE report slipped to 0.1% from 0.2% a month earlier and at 2.1% y/y. The Chicago PMI report was slightly better than expected in May at 49.1 and improving from 48.3 a month earlier, but continued to remain beneath the key 50-level. Meanwhile, the final reading for the University of Michigan improved moderately from the initial reading to 59.8, but remains mired near its lowest levels in nearly a decade.

Euro hit by Data

The euro slumped beneath the 1.55-region to 1.5463 following a disappointing set of German retail sales data, which unexpectedly declined for the second consecutive month down 1.7% m/m and 1.0% y/y. The Eurozone unemployment rate in April held steady at 7.1%, while the flash inflation for May crept up to 3.6% from 3.3% a month earlier.

The recent slate of softer German data, including yesterday¡¯s labor report, has pressured the euro lower but does not alter our outlook for the ECB to remain hawkish over the coming months. As such, we anticipate a renewed strengthening in the single currency over the coming weeks to retest its all-time highs near 1.60.