USD/JPY Hits 5 Year High, AUD/JPY 15 Year High (page 2 of 2)

The US dollar is mixed today with moderate strength seen against the Euro and Japanese Yen, but weakness against the British pound and Canadian dollar. Inflation reports continue with producer prices up for release tomorrow. The weak dollar helped to boost import prices; we expect the same impact on producer prices as well.

Euro Holds Steady Despite Dollar Strength

The Euro has shown impressive resilience today in the face of stronger US economic data. The economic calendar was very light with first quarter employment, French and Italian consumer prices being the only pieces of economic data released today. There were no major surprises in the data with employment slightly stronger and consumer prices slightly weaker. Comments from Eurozone officials continue to be hawkish. ECB members Liikanen and Garganas repeated the very familiar warnings about inflation risks. This hawkish sentiment is helping to limit losses in the Euro. Consumer prices from Germany and the Eurozone as a whole are due for release tomorrow along with non-farm payrolls from France. Most of these are final figures so no surprises are expected.

British Pound: Drop in Wage Growth Sends Currency Tumbling

Weaker economic data sent the British pound tumbling against the US dollar today. Despite the fact that jobless claims dropped more than expected and the percentage of people claiming unemployment decreased, the sharp fall in average earnings triggered a major sell-off in the British pound. Softer wage pressures reflected poorly on overall inflationary pressures. This comes as a surprise given the hawkish comments from BoE Governor King Monday night. Losses should be limited however as the central bank is still on track to raise interest rates this year. UK retail sales are due for release tonight. We are looking for softer numbers given weakness in department store sales.

Australian and Canadian dollars Struggle to Rally

The Australian and Canadian dollars struggled to rally today despite strong gains in the New Zealand dollar. This price action is particularly interesting given the fact that there were solid gains in both AUD/JPY and CAD/JPY. Canadian data was softer than expected with manufacturing shipments falling by 0.6 percent in the month of April. Australian data was mixed with consumer confidence falling but home sales rising. Echoing the overall strength of the economy, Treasurer Costello said that employment is strong and consumers are confident. Meanwhile New Zealand retail sales are due for release tonight. Expectations are low but given recent comments from the RBNZ, the risk is to the upside.