| 5/28/2008
2:35 PM: EUR/$..1.5636 $/JPY..104.61 GBP/$..1.9804
$/CHF..1.0374 AUD/$..0.9620 $/CAD..0.9898
USD Buoyed on Durable
Goods Orders
The dollar extended its gains versus the euro
and yen on Wednesday, but struggled to carry over
that strength against the sterling and Aussie.
US economic data released earlier today propped
the greenback up near the 1.56-level against the
euro and 105.29 versus the yen. Durable goods
orders for April surprised to the upside, with
the headline figure posting a 0.5% decline and
beating calls for a drop of 1% versus a 0.3% decline
in March. The excluding transportation orders
surged by 2.5% compared with forecasts for a 0.5%
decline and up from 0.9% the previous month.
The US economic calendar for Thursday consists
of Q1 GDP, core PCE and weekly jobless claims.
The Q1 GDP reading is expected to improve to 0.9%
from 0.6%, while the GDP deflator is seen unchanged
at 2.6%. Core PCE prices are also expected to
hold steady at 2.2%. Weekly jobless claims are
seen creeping back up to 370k from 365k a week
earlier.
Minneapolis Fed President Gary Stern offered
a downbeat assessment of the economy, saying the
current downturn in housing appears more severe
than in the early 90¡¯s. Stern said
that US economic growth will likely be modest
in the near-term and expects unemployment to rise
somewhat. He said that overall inflation growth
is clearly too rapid and attributed the increase
to food and energy costs. Further, Stern tried
to dissuade the assertion that energy prices and
the dollar were linked.
Euro Slips to 1.56
The euro retreated against the greenback toward
the 1.56-level on the heels of the stronger-than-forecast
readings for durable goods orders. Germany¡¯s
import prices were higher than expected, up 0.9%
m/m and 5.7% y/y. Consumer prices also edged higher
in Germany, with May CPI rising to 0.6% versus
a 0.2% decline a month earlier and 3.0% compared
with 2.4% a year earlier. The HICP readings were
also stronger than expected at 0.6% m/m and 3.0%
y/y. Meanwhile, the March Eurozone current account
balance posted a 15.3 billion euro deficit compared
with a 4.3 billion euro surplus in February.
Traders will shift their focus to Germanys labor
report, scheduled for release overnight. The May
unemployment rate is expected to ease to 7.8%
from 7.9%, while the unemployment change is forecast
at -20k from -7k in April. With the German economy
showing more resilience, the ECB has more flexibility
to focus on curbing inflationary pressure in the
economy and will likely maintain its hawkish bias
for the remainder of the year.
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