Forex Commentaries

• The dollar was lower on Friday. Recent economic figures suggested the global economy is recovering, increasing investor willingness to hold riskier assets. The FX market is awaiting next week’s Federal Open Market Committee meeting. The Federal Reserve will likely give a somewhat upbeat outlook for the US economy with no emphasis on interest-rate hikes as deflation remains a more imminent risk than inflation. The S&P 500 was up 2.86 points to 921.23. The yen advanced despite falling Japanese department store sales. The euro rose as European Union leaders saw signs of a “sustainable economic recovery.” Sterling gained after Bank of England Governor Mervyn King said the UK contraction is beginning “to flatten off.” The Canadian dollar fell modestly as Canada’s April retail sales posted the first decline in four months.


• The AUD/USD gained as risk appetite increased demand for higher-yielding assets. The pair, strongly correlated with equity and commodity prices, is still in the uptrend that started in March. The AUD/USD has formed a double top; however, remaining in a clearly defined uptrend. A break of the uptrend will be bearish for the pair while a penetration of the double top will be bullish.

Financial and Economic News and Comments

US & Canada

• In May, Michigan remained the state with the highest unemployment rate, 14.1%, while the states with the next highest rates were Oregon, 12.4%; Rhode Island and South Carolina, 12.1% each; California, 11.5%; Nevada, 11.3%; North Carolina, 11.1%; Ohio, 10.8%; District of Columbia and Tennessee, 10.7% each; Indiana and Kentucky, 10.6% each; and Florida, 10.2%, the Labor Department reported. “The California, Nevada, North Carolina, Oregon, Rhode Island, and South Carolina rates were the highest on record for those states,” according to the report. Nebraska and North Dakota had the lowest unemployment rate in May, 4.4% each, while New York’s jobless rate was 8.2%.


• Canada’s retail sales declined for the first time in four months in April, falling a more-than-expected 0.8% m/m to C$33.5 billion ($29.8 billion), after a 0.3% m/m increase in March, data from Statistics Canada showed. The decline was led by a 1.9% m/m drop in the automotive sector. Retail sales less autos fell a more-thananticipated 0.5% m/m in April, a second consecutive decline.

Europe

• Germany’s producer prices were unchanged m/m in May, as forecast, after a 1.4% m/m decline in April, according to PPI data from the Federal Statistical Office. The May PPI fell 3.6% y/y, as expected and the biggest year-on-year drop since April 1987, following April’s 2.7% y/y decrease.

Asia-Pacific

• Japan’s nationwide department store sales fell 12.3% y/y in May after an 11.3% y/y fall in April, while Tokyo department store sales dropped 14.0% y/y following April’s 11.9% y/y decrease, the Japan Department Store Association reported.


• Many Bank of Japan policy board members viewed that the BOJ “should continue to implement steadily the various policy measures already introduced because financial conditions as a whole had remained tight,” while some members stated that “whether or not the Bank would continue with various temporary measures, which were to be terminated on or after September 30, should be determined based on close examination of developments in financial markets and corporate financing,” according to minutes of the May 20-21 BOJ monetary policy meeting released in Tokyo today.


• Thailand’s exports fell 26.6% y/y to $11.7 billion in May, the deepest decline since at least 1992, after a 26.1% y/y decrease in April, the Commerce Ministry’s Permanent Secretary Siripol Yodmuangcharoen said. Imports dropped 34.7% y/y to $9.25 billion, following April’s 36.3% y/y plunge. The May trade surplus widened to $2.41 billion.

FX Strategy Update