Currency Updates:
U.S. Dollar Trading (USD) had a mixed day Thursday with US stocks well supported on impressive company results while the EUR/USD was under pressure after Spain was downgraded. Weekly Jobless Claims were a little weaker pushing up to 388k vs. 375k. Looking ahead, Q1 GDP forecast at 2.5% vs. 3% previously.
The Euro (EUR) the EUR/USD rallied into Europe as the positive momentum from the FOMC Dollar weakness had another leg to run. The market then fell back to lower 1.3200 region a more familiar level and we were very contained until Spain was downgraded late in the US session by S&P. This is not the first downgrade we have seen in previous months so the downside might be limited with the EUR/USD already back above 1.3200 in the Asian session. The real test will be the European Bond Traders reaction to the downgrade in the European session later today. A move of Spanish long term bonds back above 6% could prompt fresh risk aversion selling.
The Japanese Yen (JPY) the USD/JPY fell sharply to Y80.65 after rumors that the BOJ would not announce any fresh easing measures today and that they believed such measures would not be effective. The market bounced in the US session back above Y81 and we are cautious now ahead of the BOJ decision expected in Asian Friday.
The Sterling (GBP) the GBP/USD was contained but very strong just under 1.6200. April CBI Distributive Trades were weaker than expected at -6 vs. -4 previously. The EUR/GBP fell to 0.8150 support after the Spanish downgrade but has not broken through the support. Also ahead, March German Import Prices forecast 0.9% vs. 1.0%.
Australian Dollar (AUD) the AUD/USD broke above 1.0380 and tested 1.0400 before spending the rest of the day in a tight range. The RBA meets on Tuesday but before that that we have US GDP (tonight) and Chinese PMI (Monday) risk events. Looking ahead, BOJ Interest Rate forecast to hold rates at 0.1%.
Oil & Gold (XAU) Gold was strong moving up to $1660 before consolidating in a tight range. OIL/USD was very quiet under $105 but supported on dips.
