The dollar weakened against its peers today following a series of disappointing US data which dampened optimism over the US economy’s strength.  The number of jobless claims filed for the week ending May 16 increased from 264,000 for the previous week to 274,000 while experts had forecast a total of 271,000.  Existing home sales declined 3.3% in April from a total of 5.21 million units in March to 5.04 million while experts forecast a 1.0% increase to a total of 5.24 million units.  The Federal Reserve Bank of Philadelphia reported a decrease to 6.7 for its manufacturing index for May from a reading of 7.5 in April while experts forecast an increase to 8.0.  After yesterday’s Fed statement did not change predictions that the central bank will increase rates later this year the market awaits US inflation data released tomorrow and remarks from Fed Chair Yellen.

The euro strengthened against the dollar regaining ground after coming off highs of 1.1181 set earlier in the day.  The euro was boosted by data which revealed that the composite purchasing managers’ index for France’s initial reading was up from 50.6 in April to 51.0 in May.  However Germany composite PMI declined to its lowest level in 5 months fueling speculation that growth is losing traction.  The initial reading for the euro zone’s composite PMI dropped to its lowest level in 3 months to 53.4 in May from 53.9 in April.  

The pound strengthened against the dollar with the pair up around 0.75% trading at 1.5656 on the back of data which revealed that UK retail sales surged 1.2% in April beating expectations for a rise of 0.4%.  UK retail sales were underpinned by a jump in clothing and footwear sales.  Core retail sales which do not include automobile sales were also up 1.2% in April while experts predicted a 0.3% increase.  Average UK store prices dropped for the 10th month in a row declining 3.2% from a year prior.  The pound was stronger against the euro.    

The yen strengthened against the dollar with the pair trading in a tight range above its 121 handle.  The market broadly anticipates the Bank of Japan to not expand its current stimulus program when the central bank makes its monetary policy statement tomorrow, although indications of what future policy might be could be revealed.  The yen most likely will not be affected if the bank maintains its current course.  The pair could lose ground back to 120 if the bank is less dovish following solid GDP, inflation, jobs data and outlook on wages.

The Australian, New Zealand and Canadian dollars held their ground against a softer greenback.  These export associated currencies were pressured by figures which revealed that China’s HSBC flash manufacturing PMI increased to a reading of 49.1 in May from 48.9 in April compounding forecasts for a rise to 49.3.  The loonie lost to a 1 month low against the greenback.  

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