Dollar Weighed By Weak Data, Fed

 
Snapshot: 

        Dollar weaker; 10-year Treasury yield at 2.055%; U.S. stock futures fall; Nymex crude at $59.11; gold at $1206.77
        -Watch for: Core inflation, initial jobless claims, Chicago PMI, personal income and outlays; China Manufacturing PMI; earnings from Exxon Mobil, ConocoPhillips, Time Warner Cable, Viacom, Teva Pharm, Cigna, LinkedIn, Visa
        News: Wall Street Pushes Back on Foreign Bribery Probe; Bank of Japan Cuts Price Outlook; Eurozone Prices Steady
        The euro surged to a two-month high against the dollar Thursday after the greenback was dented by poorer than expected U.S. growth data. By midmorning in Europe, the euro had climbed a further 1% to $1.1256--its strongest level against the buck since late February.
        Investors were also reacting to the latest statement from the Federal Reserve, with central bank officials pointing to the recent cooling of economic activity, which may see the bank hold off for longer from raising interest rates.
        The dollar fell against the yen in Asia, after the Bank of Japan left policy unchanged, disappointing some investors who saw a remote chance of additional easing action that would have strengthened the dollar.
        New Zealand's central bank also stood pat on policy, prompting a fall in the New Zealand dollar.
        U.S. Treasurys remained under pressure, dragged lower by weak euro-zone bonds, as investors wait for the first of the second-quarter data releases.
        "Due to the central bank's reference to future monetary policy decisions being dependent on data, the significance of incoming economic numbers will increase. The initial jobless claims and Chicago PMI will be the focus of interest today," said analysts at Helaba.
        At 5.12am ET, the 10-year cash yield was 2.055% and the June contract was 6/32 lower at 128-105.
        European government bonds continued to tumble after the previous session's heavy selloff.
        The rise in yields continued in early European trade, albeit at a slower pace, with Germany's 10-year yield rising above 0.3% for the first time since early March.
        Traders said no single factor is behind the selloff, but recent signs of an improvement in the eurozone economy have left investors concerned that yields are unsustainably low. A slight uptick in German inflation exacerbated those worries on Wednesday.
        "While we don't think that QE will ultimately be successful in significantly increasing economic growth in the eurozone, we do think that it will ultimately cause an increase in inflation expectations that will [cause Bund yields to rise]," said fixed income strategists at Rabobank.
        The sharp move in German bonds--considered Europe's safest and most liquid market--was an echo of the October "flash crash" in U.S. Treasury yields that further highlights the lack of liquidity in bond markets, according to analysts at Commerzbank.
        "Markets will have to get used to these erratic swings going forward with banks being forced to curtail their balance sheet capacities and central bank interventions further undermining trading liquidity," they said.
        U.S. stock futures pointed to another day in the red Thursday, ahead of a stream of data that could provide a trigger to build on the previous session's Fed-fueled losses.
        Investors were also waiting for the latest raft of corporate earnings, including results from Exxon Mobil, New York Times and Time Warner Cable.
        Futures for the Dow Jones Industrial Average dropped 67 points, or 0.4%, to 17,887, while those for the S&P 500 index lost 6 points, or 0.3%, to 2,093. Futures for the Nasdaq 100 index gave up 20.75 points, or 0.5%, to 4,459.
        Investors will get data on both the labor market and inflation later on Thursday. At 8.30am ET, weekly jobless claims are due, forecast to show 287,000 Americans filed for unemployment benefits last week, down from 295,000 the week before.
        The employment-cost index for the first quarter, personal income and consumer spending for March are also due at 8.30am ET. Core inflation, which is one of the Fed's most closely watched measures, comes out at 8.30am ET as well. Consumer-price data for the eurozone showed earlier on Thursday that the region escaped negative inflation in April after four months of declining consumer prices.
        Oil prices gained in European trade, with U.S. crude trading at its highest level this year, extending gains on signs of slowing U.S. oil production.
        On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $59.11 a barrel, up $0.53 in the Globex electronic session. West Texas Intermediate crude had settled at $58.58 a barrel in the last trading session, its highest since December 11, 2014.
        Brent crude for June delivery on London's ICE Futures exchange was up $0.17 to $66.01 a barrel. The global oil benchmark remains supported by the current rally, and a weaker U.S. dollar.
        Gold prices were slightly higher on the London spot market as the dollar softened following the release of the FOMC statement.
        Spot gold was trading up 0.2% at $1,206.77 a troy ounce in morning European trade.
        With market consensus now that the Fed is increasingly likely to delay a rate rise until September, the upward potential of the U.S. currency may be capped. However, some market participants don't see the FOMC statement as having deviated far from expectations. As a result, the outlook for gold trading is seen to remain neutral.
        "The dollar may look to soften from here, up till June possibly, [while] gold looks resilient and continues to stick [above] $1,200," said Howie Lee, an investment analyst at Phillip Futures.
        Wall Street Pushes Back on Foreign Bribery Probe
        Banks are embroiled in a dispute with the U.S. government over what they term its "aggressive" interpretation of foreign-bribery laws. The probe has broad implications for how corporations do business overseas.
        Bank of Japan Cuts Price Outlook
        Japan's central bank cut its outlook for prices but leaves policy unchanged, despite continuing speculation over further easing action.
        Eurozone Prices Steady
        Eurozone consumer prices stopped falling in April, further easing fears that a slide into deflation could derail the currency area's fragile economic recovery.
        European Bonds, Stocks Continue Slide
        European stocks and bonds continued to tumble after the previous session's heavy selloff.
        China Raises Investment Cap for Foreign Investors
        China gave foreign investors, including Singapore's sovereign-wealth fund and the Australian arm of Vanguard Group, access to buy a further $10 billion worth of the country's stocks and bonds as Beijing accelerates the opening up of its markets.
        German Retail Sales Fall
        German retail sales fell unexpectedly in March from the previous month, extending a smaller decline seen in February.
        German Jobless Rate at Record Low
        German jobless claims declined by less than expected in April, but the jobless rate remained at a record low, making Germany's labor market the most vibrant in the eurozone.
        Kuroda Dismisses Extra Easing
        The Bank of Japan Governor acknowledged that the timing of reaching the central bank's 2% inflation target has been somewhat delayed largely due to a fall in energy prices but ruled out additional stimulus for now.
        Japan's Output Falls Slightly in March
        Japan's industrial output fell slightly in March for the second straight month of decline as the nation struggles to grow despite lower oil prices and a booming stock market.
        Write to paul.larkins@wsj.com
        (END) Dow Jones Newswires

        April 30, 2015 06:12 ET (10:12 GMT)

#FX
#Forex
#SaleForex
#DollarStrong
#DollarWeak
#FedRates
#FedDecision