Article Highlights

  • Philly Fed manufacturing index down from -1.6 to -1.8 vs. +3.2 forecast
  • U.S. initial jobless claims at 278K, down from 294K previous
  • U.S. CB leading index up 0.6% vs. 0.4% forecast
  • FOMC member Dudley: Rate hike possible in June
  • Dudley: Q2 growth to be stronger than Q1
  • Fed official Lacker: Strong case for a rate hike in June
  • FOMC member Fischer: US economy approaching full employment and target inflation, needs faster potential growth
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Hawkish Fed officials took the stage during the U.S. trading session, allowing the Greenback to squeeze out a few more gains against its counterparts.

Major Events:

FOMC policymakers’ speeches – Following the relatively hawkish April FOMC meeting minutes released yesterday, Fed officials reiterated their upbeat outlook in their latest testimonies. For FOMC member Stanley Fischer, the U.S. economy is already approaching full employment and target inflation levels, but what it needs is faster potential growth.

Formerly dovish FOMC member William Dudley echoed this view in saying that he expects Q2 growth to be much stronger than Q1, citing the surge in retail sales as a strong indication of a consumer-led rebound. He added that the June meeting will definitely be a live one, which basically means that a rate hike is still on the table. Fed official Lacker mentioned that he even supported tightening in April and that there’s a strong case for a June hike but he isn’t a voting member, unlike Dudley and Fischer.

Mixed U.S. reports – The latest batch of economic figures from the U.S. came in mixed, keeping market watchers guessing about the chances of a June rate hike for the Fed. The Philly Fed manufacturing index slumped from -1.6 to -1.8 instead of rising to the estimated 3.2 figure, joining the other manufacturing surveys in hinting at an industry slowdown.

Meanwhile, the CB leading index posted a stronger than expected 0.6% uptick versus the projected 0.4% forecast. Initial jobless claims came in close to consensus at 278K, down from the earlier 294K figure.

Major Currency Movers:

USD – Dollar bulls seem to be exhausted from their post-FOMC minutes rallies, as the currency barely made headway after hearing more hawkish remarks from Fed officials.

USD/JPY retreated from a session high of 110.23 to a low of 110.08, EUR/USD bounced off the 1.1180 area to retest the resistance at 1.1200, and USD/CHF climbed past the .9900 handle to a high of .9913.

GBP – The pound was able to hold on to its gains from the previous session and go for more, thanks to stronger than expected U.K. retail sales data.

GBP/USD managed to keep its head above the 1.4600 handle, GBP/JPY is consolidating around 160.60, EUR/GBP broke below .7700 to a low of .7650, and GBP/CHF is testing the resistance at 1.4500.

Watch Out For:

  • 10:45 pm GMT: New Zealand visitor arrivals
  • 3:00 am GMT: New Zealand credit card spending

See also:

Asian Session Recap

London Session Recap

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