The S&P 500 and the Dow continue to trade in a tight range, but the Nasdaq is gradually closing the gap between itself and its two counterparts. Although the Nasdaq has managed to slowly march higher, large-cap tech plays remain a source of weakness for the average.
The euro fell, erasing earlier gains, after European Central Bank President Jean-Claude Trichet’s 2012 inflation forecast prompted traders to scale back bets for the pace of interest-rate increases.
The shared European currency slid against the dollar after climbing as much as 0.5 percent, even after Trichet said at a press conference in Frankfurt that “strong vigilance” is needed to contain inflation, which means policy makers may boost rates in July. The ECB revised its 2012 inflation and gross domestic product forecasts.
“The euro sold off as the inflation forecasts and the lowering of the bottom end of the GDP forecast may provide a headwind to further tightening,” said Jeremy Stretch, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “He has repeated what was basically already priced into the market.”
“We are not signaling any particular pace for the next decisions on our interest rates,” Trichet said. “It means that we are in a mode where there might be, in the next meeting, an increase of rates, but we are never pre-committed.”
The ECB said inflation next year will accelerate between 1.1 percent and 2.3 percent, compared with an earlier forecast of 1 percent to 2.4 percent. Policy makers see growth in 2012 of 0.6 percent to 2.8 percent, from a previous range of 0.8 percent to 2.8 percent.
The common currency also declined amid renewed concern that Greece may need to restructure its debt.
“You’ve got to view what has happened to the euro as a combination of Trichet’s comments and concerns over the Greek bailout,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “Trichet’s ‘strong vigilance’ was strongly baked in, so it was difficult to see a particularly positive reaction. Greek concerns are mounting as we’re yet to get a clarity of position as to what each of the parties thinks with regard to a restructuring.”
The Dollar Index rose today as the U.S. trade deficit unexpectedly shrank 6.7 percent to $43.7 billion in April, Commerce Department figures showed today.
New Zealand’s currency climbed to a record after the nation’s central bank said borrowing costs will need to rise in the next two years.
The Bank of England kept its benchmark rate unchanged at 0.5 percent at today’s meeting.
Relief buying in the wake of a string of losses has stocks up sharply and headed for their best performance of the month. The move has been mostly broad based.
The materials sector has rallied ahead to a 1.5% gain, which makes it this session's top performing sector. The space is currently led by the likes of Monsanto (MON 69.47, +1.85). The agricultural products company has been helped by a bullish USDA crop report that was released earlier this morning.
Financials have also extended their recent run. In turn, the sector is now up 1.1%, second only to materials. Banks have been a big driver of the move. Strength in that space has the SPDR KBW Bank ETF (KBE 23.36, +0.26) up nicely.
"The impact from supply chain disruptions following the Japan earthquake was evident in April's wholesale inventories report. Total wholesale inventories rose a less-than-expected 0.8% (BarCap and consensus: 1.0%) with auto inventories down 1.3%. Auto sales and inventory accumulation are likely to be a negative for Q2 GDP growth but should be partly offset by weaker imports." They still see Q2 real growth 'close to' +2% - but with less trade drag and more inventory drag.
Michael Woolfolk of Bank of New York Mellon says: "It is obvious from both the ECB statement and ECB President Trichet's remarks that the ECB is prepared to raise rates as early as next meeting." Inflation remains a key risk for the eurozone, he says.
EUR/USD back above $1.4500 and currently holds around $1.4515 amid the accelerated lift of EUR/JPY. Position adjustment also noted on the market now. resistance comes at $1.4520, then - ahead of $1.4550 (earlier broken supports).
EUR/USD $1.4350, $1.4365, $1.4400, $1.4450, $1.4500, $1.4750
USD/JPY Y80.00, Y80.50, Y80.60, Y80.70-75, Y81.00, Y79.25
AUD/USD $1.0550, $1.0600, $1.0640, $1.0680, $1.0690, $1.0700, $1.0730, $1.0785
EUR/USD falling currently after rate triggered stops on a break under $1.4500. Rate now holds around $1.4485 with more stops under $1.4475 and then - ahead of June 3 low at $1.4450.
U.S. stocks were headed for a modest bounce Thursday, following an unexpected narrowing of the U.S. trade deficit.
Stocks have declined for six straight sessions as worries about a growth slowdown have dominated trading. Any early enthusiasm could be tempered by initial unemployment claims data, which remained above 400,000 for the ninth straight week.
Economy: The Labor Department released its weekly initial jobless claims, showing that 427,000 people applied for jobless benefits last week. That was slightly higher than expected.
The government also issued its monthly report on the U.S. trade balance, showing the gap narrowed to $43.7 million in April, instead of the expected widening.
Companies: After the market closed Wednesday, Texas Instruments (TXN, Fortune 500) lowered its outlook for second-quarter earnings and revenue. Shares of the technology company fell 4.5% in after-hours trading, and dipped less than 1% in premarket trading.
J.M. Smucker (SJM, Fortune 500) shares rose 2.5% after the jam and jelly maker reported a fourth-quarter profit that topped forecasts by a penny per share.
08:30 UK Trade in goods (April), bln -7.4 -7.5 -7.7
08:30 UK Non-EU trade (April), bln -4.3 -4.4 -4.5
11:00 UK BoE meeting announcement 0.50% 0.50% 0.50%
11:45 EU(17) ECB meeting announcement 1.25% 1.25% 1.25%
The euro rose against the yen and the dollar on speculation ECB's President Jean-Claude Trichet will signal today that policy makers intend to raise interest rates next month.
“The euro’s finding support on expectations that the ECB is likely to signal a rate increase next month,” said Jeremy Stretch at Canadian Imperial Bank of Commerce. “It’s highly probable that Trichet will repeat the ‘strong vigilance’ phrase to indicate a possible rate hike in July.”
“There’s some expectation that the ECB can stay quite hawkish,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG.
The BOE kept its benchmark interest rate unchanged at 0.5% at today’s meeting.
The ECB left its rate unchanged too - at 1.25%. The central bank raised borrowing costs in April for the first time in almost three years.
The Dollar Index slipped before a U.S. report that economists said will show the trade deficit widened to the most in 10 months.
Australia’s dollar fell after a report from the statistics bureau showed jobs increased by 7,800 in May from the previous month. That compared with the median estimate for a 25,000 gain.
EUR/USD printed session lows around $1.4583 before recivered to $1.4613 ahead of Trichet's conference.
GBP/USD rose to highs on $1.6463 before sliding to $1.6398. Rate failed to break under the figure and recovered to $1.6430.
USD/JPY tries to challenge Y80.00 sliding from earlier highs on Y80.30.
US data also starts at 1230GMT, when initial jobless claims are expected to fall 4,000 to 418,000 in the June 4 holiday week. At the same time, the international trade gap is expected to widen slightly to $49.0 billion in April after widening in March on rising energy prices.
EUR/USD holds around $1.4612, higher earlier printed lows near $1.4586. Rate rises ahead of ECB rate decision at 11:45 GMT. Offers seen at $1.4620/25 ahead of earlier highs at $1.4646, with offers seen to $1.4650. Support remains
back at $1.4585/75.
The euro holds steady ahead of a European Central Bank policy meeting later on Thursday at which the ECB is expected to lay the groundwork for a rate hike in July, with any hints on tightening possibly driving the currency through key resistance.
The central bank is seen as likely to use higher staff inflation forecasts to justify a case for tightening in July.
While traders say the view that the ECB is likely to signal rising rates has already been priced in to the euro's advance, the move could still push the currency above resistance at $1.4700, which it failed to breach on Wednesday.
"The euro has been pressured by concerns over euro zone debt, so I think it would still have enough momentum to go above $1.4700 if the ECB suggests a rate hike," said Teppei Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
Ino added that a further break above a May 3 low of $1.4755 could help the euro climb even higher and the single currency could move closer towards resistance at its May 4 high of $1.4940.
The euro still hampered by uncertainty over Greece.
The greenback slipped back towards a one-month low.
The Federal Reserve's beige book summary of economic conditions confirmed that the economy slowed in May due to higher gasoline prices and the supply chain disruptions following Japan's earthquake and tsunami in March.
New Zealand's central bank held rates steady on Thursday but also set the stage for higher rates, saying hikes were needed as the economy bounces back from the Christchurch earthquake.
USD/CHF gained strongly to session highs above Chf0.8400. Rate triggered stops on a break above Chf0.8410 and challanged Chf0.8412. Rate later retreated and currently holds around the figure. EUR/CHF currently holds near Chf1.2278.
EUR/USD $1.4350, $1.4365, $1.4400, $1.4450, $1.4500, $1.4750
The yen strengthened as global stocks fell and the International Monetary Fund said its 26 billion-euro ($38 billion) loan to Portugal “entails important risks.”
The euro slid from a four-week high versus the dollar after German Finance Minister Wolfgang Schaeuble said bondholders must contribute a “substantial” share of a second aid package for Greece.
The yen rose to the strongest in a month against the dollar as Federal Reserve Chairman Ben S. Bernanke said the “frustratingly slow” U.S. recovery warrants sustained monetary stimulus.
New York Fed President William Dudley said that the U.S. recovery from the worst financial crisis since the Great Depression is “distinctly subpar” even after “aggressive monetary and fiscal stimulus.”
The pound fell against the dollar and the euro after Moody’s Investors Service said the U.K. risks losing its top credit ranking should growth remain weak. It said the outlook on the country’s rating is “stable.”
Fed's Beige book: Econ activity generally continued to expand.
Resistance 3: Y81.80 (May 31 high)
Resistance 3: Chf0.8540 (38.2 % FIBO Chf0.8890-Chf0.8330)
Resistance 3: $ 1.6480 (resistance line from May 2)
Resistance 3: $ 1.4750 (May 3 low)
08:30 UK Trade in goods (April), bln -7.5 -7.7
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