In a largely technical move as major markets were returning from the long weekend, the dollar managed to take out key levels versus the yen and the euro. The US dollar appeared to be back in favor after Fed Chair Janet Yellen reaffirmed the bank’s intention to raise interest rates this year and as some recent economic statistics out of the United States came in on the strong side.
The dollar made a fresh 8-year high versus the yen at 122.55. Earlier during the session Japanese Corporate Service Prices for April rose 0.7% year-on-year, ahead of expectations of a 0.6% increase.
In other economic news, New Zealand’s trade balance for April was slightly higher-than-expected at 123 million, but sharply down from the previous month’s upwardly revised 754 million kiwi dollars surplus. The kiwi broke below 73 cents against the US dollar to trade at its lowest in a month at 0.7290.
Uncertainty about Greece’s ability to make its debt repayments to the IMF weighed on the euro as it also fell to its lowest in a month, slightly below 1.09. Negotiations between Greece and its creditors are continuing as a deal is proving elusive. Greek official optimism that a deal was near has been replaced by the Finance Minister blaming the creditors of asking too much of the country.
In a speech by the Fed Vice-chair Stanley Fischer, he said that markets should concentrate more on the data rather than the date that the Fed will raise rates. It is the pace of subsequent rate hikes after the first increase that will mostly determine the impact on the economy and not so much the exact date of the first rate hike.
Looking ahead to the remainder of the day, following a European session which lacks important data announcements, traders will take their cue from a flurry of US numbers. April durable goods orders will be followed by S&P / Case-Shiller house prices and then Markit flash Services PMI, new home sales for April, consumer confidence and regional manufacturing surveys from the Richmond and Dallas Federal Reserves. Therefore plenty of data to check the pulse of the US economy and whether it is recovering from the first quarter slowdown.