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Video for May 5th, 2008 (3 min 26 sec): Dollar Weaker vs Euro, Yen, Loonie, and Aussie but Gains on Pound 

AUS TDMI Inflation for April at 0.5% on the Month, 4.3% on the Year 

Australia's TDMI inflation gauge rose 0.5% in April, and 4.3% in annual terms. the central bank's comfort level is within the 1% to 3% range. Inflation was led by higher health costs, rents and petrol prices. As price increases accelerate, the Reserve Bank of Australia is compelled to at least hold rates if not increase them.

AUS Housing Increases 1.1% in 1st Quarter, Up 13.8% on Year

Housing prices in Australia rose 13.8% in annual terms during the 1^st quarter, breaking the trend seen around the world. Compared to the 4^th quarter, prices were up 1.1%, higher than the flat reading expected. The gains came despite 12-year high borrowing costs.

AUS Services Fall 7.6 points to 47.3 in April

In a third release, the services sector in Australia saw a rather sharp decline for April, falling 7.6 points from March and dipping below the 50 boom-bust level. However, the market was more focused on the inflation data.

AUD/USD - High Inflation Boosts Aussie 

 

Today's report on inflation boosted the Aussie ahead of RBA interest rate announcement tomorrow. Against the US Dollar the Aussie rose about 100 pips. The market expects a hold, but also sees that the bank may become more hawkish in light of Sunday's inflation data.

EUR Sentix Regresses for May After Strong April Showing

In Europe, the Sentix investor confidence index declined to 3.5 for the May period, undershooting expectations. In April the indicator rose to 4.1 from 0.4 in March, a strong recovery. Investors are most likely concerned about rising inflation cutting into growth, and the rising Euro damaging demand from abroad.

US ISM Non-Manufacturing At 52.0 in April, Surprises Forecasts on Upside

In the US, the ISM non-manufacturing index unexpectedly rose to 52 for April, moving back into expansion after 3 months of results below 50. The report helps to bolster the case that the US economy is seeing some improvement after the last two quarters saw the US face a sharp slowdown. Fed policy makers have signaled that they will hold interest rates steady at 2%. If economic data continues to surprise on the upside, then they will be able to carry out that intention.

EUR/USD - Euro Gains Despite Better Than Expected Services Report

 

The Euro-Dollar pair was trading higher today, though in a small range. The Dollar gained in a knee-jerk reaction following the better than expected ISM data but pared those gains rather quickly. The pair is up 80 pips from the week's open as of 1:25 PM EST.

USD/JPY - Yen Stronger as US Stocks Start the Week in Red

 

It was a similar story in the Dollar-Yen pair. The Dollar was down after strong gains at the end of last week. The services data from the US gave the pair a boost, but those gains were quickly cut down. US stocks were weaker today in the wake of Microsoft pulling its bid to acquire Yahoo.

GBP/USD - Pound Falls As Interest Rate Outlook Favors Dollar

 

With the Bank of England still cutting interest rates in the upcoming months and the Fed ready to pause its cutting campaign, the interest rate spread advantage favors the US Dollar. The pound continues to weaken against the greenback. A 100 pip decline occurred in the European session, even as the UK market traded lightly in observance of "May Day."

USD/CAD - Loonie Gains on Rally in Oil

 

The US Dollar-Canadian Dollar pair edged down 70 pips to start the week, reversing some of the greenback's gains from the end of last week. The Loonie benefitted from a climb in oil prices, which rose about $3.40 per barrel as of 11 AM EST. Canada is the world's 8^th largest oil exporter and its currency has a rather strong correlation with oil prices.

Upcoming Releases

Tonight, Australia releases trade balance data and then the Reserve Bank will announce their interest rate decision. Overnight, Switzerland will post consumer prices while the Euro zone will reveal producer inflation. Both the Euro-zone and UK will reveal how activity in their services sectors fared in April.

Tomorrow, we get two releases from Canada - building permits and Ivey PMI.