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The Euro held a firm tone into Friday’s New York open with the single currency gaining some support from expectations that the Euro-zone outlook was improving. A stronger vaccination rate should be an important element in allowing an easing of restrictions and a stronger recovery.

Headline US retail sales were unchanged for April, below expectations of a 1.0% increase, but the March surge was revised higher to 10.7% from the original reading of 9.7%. Underlying sales declined 0.8% on the month compared with expectations of a 0.7% gain and following a 9.0% gain previously.

The control group recorded a 1.5% decline following a 7.6% gain the previous month. The dollar was unable to gain any significant support from the retail sales data with fresh doubts following underlying demand conditions following the much weaker than expected employment report released earlier in May.

The University of Michigan consumer confidence index declined to 82.8 for May from 88.3 previously and below consensus forecasts of 90.0 with a decline in the current conditions and expectations components. There was a surge in the 1-year inflation expectations index to 4.6% from 3.4% previously with the 5-year rate at 3.1% from 2.7% and inflation developments will remain a crucial market factor in the short term.

Cleveland Fed President Mester stated that the central bank is really focussed on inflation expectations at present. She saw inflation at 2% this year and heading lower again next year.  The dollar remained on the defensive and the Euro strengthened to highs around 1.2140.

CFTC data recorded a net increase in short, non-commercial dollar positons for the week, maintaining the potential for short covering. The dollar gained an element of respite on Monday with a slightly more cautious tone surrounding risk curbing selling pressure and the Euro traded around 1.2130 at the European open.



US Treasuries rallied following the US retail sales data with the 10-year yield just below the 1.65% level while the 5-year yield was held around 0.82%. The dollar tended to drift weaker as yields moved lower, although the impact was limited as the yen also lost some support amid renewed gains in equity markets. Overall, the dollar dipped to the 109.30 area at the New York close with both currencies unable to secure sustained support.

Annual growth in Chinese industrial production slowed to 9.8% for April from 14.1% the previous month and retail sales were also notably below expectations with an annual increase of 17.7%. Chinese officials expressed some caution over fundamentals which also hampered overall risk appetite.

There were also reservations over regional coronavirus trends with increased cases and restrictions in Singapore and Taiwan. Regional equity markets were mixed with losses for Japan offset by gains in China and the dollar posted a limited net gain to 109.35 after hitting selling interest close to 109.50.



Overall Sterling moves were influenced more strongly by global developments on Friday with a lack of domestic data. There were, however, some reservations over the Indian coronavirus variant in the UK which continued to spark some speculation that there could be a delay to the UK re-opening measures due in June.

In this context, there was some caution ahead of a news conference by Prime Minister Johnson after the European close.

Sterling nudged above 1.4100 against the US dollar as the US currency lost ground in currency markets while the Euro found support below 0.8600.

CFTC data recorded a net increase in long Sterling positions to 28,000 contacts in the latest week, maintaining the risk of a correction if confidence dips. Reservations surrounding the Indian variant continued over the weekend, but with some relief that vaccines were still seen as effective.

Risk conditions were slightly more cautious on Monday, but housing data remained strong with further evidence of tight labour markets. The UK currency traded just below 1.4100 against the dollar as the US currency stabilised with the Euro holding just above 0.8600 as markets continued to monitor coronavirus variants.



The Swiss currency was held in tight ranges on Friday with a lack of fresh incentives. The Euro posted slight gains to the 1.0950 area while the dollar retreated to lows near 0.9010 amid wider weakness, although there was some support close to the 0.9000 level.

Markets continued to monitor global inflation trends closely with further concern over longer-term trends. Developments in precious metals and cryptocurrencies were also a significant element in Asia with tentative net support for the franc with the dollar trading around 0.9025.




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