2013-05-31 02:30 GMT

Will the Dollar Recover Too?

U.S. stocks and Treasury yields resumed their rise but the dollar failed to follow. Instead of trading higher, the greenback lost value against most of the major currencies. The EUR/USD rose above 1.30 and USD/JPY slipped below 101 after a round of weaker than expected economic data. Equity and fixed income traders shrugged off the data but FX traders refused to budge. Long dollar positions are still being cut which suggests that currency traders are still worried about the volatility in the financial markets and the eagerness of the Fed to taper asset purchases. U.S. equity and fixed income traders have completely ignored the 5% drop in the Nikkei overnight. Japanese stocks are 13% off its highs and if it continues to decline, it may have ripple effects over to U.S. markets and keep the dollar in corrective mode. However if the Nikkei stabilizes and starts to recover, then the dollar has a chance of joining the recovery.

Yesterday's U.S. economic reports were not as terrible as the headline numbers suggest. First quarter GDP growth was revised down to 2.4% from 2.5% as lower government spending and weaker inventory rebuilding offset stronger personal consumption. U.S. jobless claims also rose to 354K from 344K and continuing claims reached 2.986 million, up from 2.923 million. While they missed expectations, these economic reports don't take the country off the road to recovery. While the economy grew less than expected in the first quarter, consumer consumption saw its biggest gain since the fourth quarter of 2010. Healthy U.S. demand should eventually lead to faster inventory replenishment and stronger underlying growth. Jobless claims increased but the absolute amount of claims filed is still relatively low and consistent with a continued labor market recovery and it did not take long for investors to realize that the Fed's plans for tapering asset purchases won't change because of today's economic reports. Personal income, personal spending, Chicago PMI and the final March University of Michigan consumer confidence numbers will be released today and while these reports are interesting, our focus will be on the global equity and bond markets as they will determine how currencies trade. Tomorrow is also month end rebalancing and with the rise in the dollar and stocks this month, the dollar will need to be sold to rebalance portfolios.-FXstreet.com

2013-05-31 08:30 GMT

UK. Net Lending to Individuals (MoM)

2013-05-31 09:00 GMT

EMU. Consumer Price Index - Core (YoY)

2013-05-31 12:30 GMT

USA. Personal Spending (Apr)

2013-05-31 13:55 GMT

USA. Reuters/Michigan Consumer Sentiment Index (May)

2013-05-31 04:01 GMT

‘Pennant’ pattern break out on EUR/USD targets a move north of 1.3200

2013-05-31 03:43 GMT

Aussie advances capped below 0.9700

2013-05-31 02:30 GMT

EUR/AUD off fresh 1.5-year highs below 1.35

2013-05-31 01:53 GMT

AUD/JPY firm bounce off 97.00 support, sets eyes on 98.30