North American Summary and Highlights 14 May

North American session

The USD saw an early bounce as April US PPI increased by a stronger than expected 0.5% on both the headline and ex food and energy rates, though the reaction faded ahead of comments by Fed’s Powell, with downward revisions to March, both headline and ex food and energy, to a 0.1% decline from increases of 0.2% offsetting much of the upside surprise in April.

The USD slipped after Powell’s comments, which noted a lack of further progress on inflation and reduced confidence that inflation would fall further, but also saw the labor market moving into better balance and seeing a rate hike as unlikely.

USD/JPY ended little changed near 156.45, while EUR/USD rose 20 pips from pre-data levels to 1.0820 while GBP/USD rose 30 pips to 1.2590. AUD/USD advanced to .6625, outperforming the CAD. EUR/CHF advanced to .9810.

European morning session

GBP gained in early trade after UK labour market data showed a stronger than expected rise in average earnings, both on the official ONS measure and the more up to date HMRC measure. While other aspects of the data were less strong, with employment and vacancies both falling again, the pound only fell back after comments from BoE chief economist Huw Pill, who said that is was “not unreasonable” to consider rate cuts in the summer.  EUR/GBP finished the session around 15 pips higher at 0.8605.

Otherwise there was the German ZEW survey, which was stronger than expected in May, helping EUR/USD to make small gains, edging above 1.0790. USD/JPY was also slightly lower at 156.30 after opening at 156.45, while AUD/USD also gained 10 pips to 0.6610.