After eight straight days of weakness, the EUR/USD is finally
getting some relief. Risk appetite stabilized overnight, helping
to lift currencies such as the euro up against the dollar. No
news was good news this morning for Greece with the baton now set
to be passed to Pasok leader Venizelos who will take a shot at
forming a coalition government. Like Samaras and Tsipras he is
expected to fail, leaving elections in June as their only option.
Until the June elections are held, it may be smarter to sell than
buy rallies in the euro.
Meanwhile we finally have some U.S. data on the calendar. This
morning's reports were mildly negative for the U.S. dollar with
trade balance widening significantly from -$45.4B to -$51.8B in
March. Exports rose 2.9 percent while imports increased 5.2
percent. Trade activity in the first quarter is now expected drag
GDP growth lower because of the sharp deterioration from Q4.
Thankfully manufacturing activity rebounded in April which
suggests that the next trade balance report could show a smaller
deficit. More importantly, jobless claims dropped from 368k to
367k. Although the prior report was revised slightly higher, the
absolute level of claims is consistent with an improvement in the
labor market. In other words, the jobless claims figures were
neither good nor bad but low enough to prevent USD bulls from
going into panic mode. If jobless claims ticked back above 380k,
we would expect payroll growth to weaken further in May but there
is nothing to worry about in today's numbers. The 4 week moving
average also dropped to 379k from 384k while continuing claims
dropped to its lowest level since summer of 2008. Finally import
prices fell 0.5 percent last month. With inflationary pressures
softening, Federal Reserve officials will have no problems with
maintaining their dovish tone.
Fed Chairman Ben Bernanke will be speaking at 9:30am ET /
13:30 GMT. The topic is bank capital but these days, you never
know when a central bank official will use scheduled speeches as
an opportunity to touch on monetary policy.