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4:30 AM UK PMI Services Survey (exp 55, prev 54.5)
Euro retains strength around the 94.70 level, near Thursday's latest 16-month high of 94.78 eyeing resistance at 95.0, 95.20 and 95.75. Support stands at 94.60, 94.0 and 93.70.
German unemployment numbers for April came in better than expected showing a 78K decline in the unadjusted number of jobless and a fall in th eunemployment rate to 9.5% from 9.7%. But markets were already aware of the figures thanks to the usual leak from Bild Newspaper Analysts played down the numbers as a result of seasonal factors reflecting favorable weather and end of Spring hiring.
Euro bulls were elated yesterday not only due to the persistent woes in Wall St but also on yesterday's ECB press conference which showed no signs of hawkishness from the Ban. Bank chief Duisenberg explicitly stated that there was no tightening bias has crept into the considerations of the governing council. While he described the medium term outlook for price stability as less satisfactory than we expected a few months ago , Duisenberg still said it was surrounded by uncertainty. Duisenberg welcomed the appreciation of the euro indicating it would contain inflationary pressures and adding that current rate does not in any way to higher growth in Europe He also specified the importance of looking at the euro's appreciation from an overall effective terms, i.e., against a group of currencies, where the appreciation has been more stable than that against the dollar.
Japan's Q1 GDP figures showed the first expansion in four quarters after Jan-Mar GDP grew 1,4% q/q or 5.7% y/y. It was the also the largest rise since Q1 2000. This means that Japan's Q1 GDP outpaced US Q1 GDP of 5.6%. But each economy emerged from a different kind of downturn. While the US Q1 number followed s shallow downturn in Q4, Japan's growth in Q1 followed a full year of negative growth, which included a depreciating yen that thus, made it possible for an exports led recovery to carry most of the recovery in the quarter. But it is widely expected that such export-led strength will wane by this summer, as the eyen has already gained over 7.5% against the dollar since April. But while the preliminary growth numbers face the possibility of a subsequent revision, Japan's large banks are suffering severe loan losses, after taking as much as $217 billion in bad loan charges.
The loudest voice of today's chorus of pro-stable currency movements from Japan came from MoF's Haruhiko Kuroda saying he would take "bold action" on forex as needed.
USD/JPY is trading tightly around the 124.20s, facing resistance at 124.65, 125.0 and 125.20. Support is seen at 124.0, 123.75 and 123.30.
The GDP figure did not stop the Nikkei from posting its 4th consecutive daily drop, falling 151 pts or 1.3% to 11423, following the latest blood shed in Wall St.
UK markets await the PMI services data for May expected to to have edged higher to 55 from 54.5. This would cast light on Wednesday's disappointing Services figures from the Eurozone but is unlikely to stop EUR/GBP from extending its 2 year high run. Cable is trading in the middle 3-week range $1.45-1.48 range facing resistance at 1.4635-40. followed by 1.4680. Support stands at 1.4575-80, 1.4535-40 and by 1.45.