Major Pairs Analysis: May 24, 2013

The euro rose against the dollar on Thursday after a Federal Reserve governor suggested monetary authorities aren't as close to dismantling stimulus programs as many think. St. Louis Fed President James Bullard said earlier that the U.S. central bank wasn't "that close" to scaling back stimulus measures. The eurozone manufacturing purchasing managers’ index rose to 47.8 in May from a final reading of 46.7 in April, better than forecast for a reading of 47.0, although still below the 50 level that separates growth from contraction. Germany’s manufacturing PMI rose to a two-month high 49.0 in May from 48.1 in April, beating expectations for a 48.5 reading. The eurozone services PMI rose to 47.5 in May from 47.0 in April, above expectations for a reading of 47.2.
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GBP/USD
The pound remained higher againt the U.S. dollar on Thursday, after mixed U.S. economic reports although gains were limited after Federal Reserve Chairman Ben Bernanke said the bank could begin tapering its bond-buying program. A report showed that U.S. new home sales rose by 2.3% to a seasonally adjusted 454,000 units in April, defying expectations for a decline to 425,000. The data came after market research group Markit said that its preliminary U.S. manufacturing purchasing managers’ index fell to a seven-month low of 51.9 in May from a final reading of 52.1 in April. Separately, the Department of Labor said the number of people who filed for unemployment assistance in the U.S. last week fell by 23,000 to a seasonally adjusted 340,000, compared to expectations for a decline of 18,000 to 345,000. data showed that the eurozone manufacturing PMI rose to 47.8 in May from a final reading of 46.7 in April, better than expectations for 47.0, but still below the 50 level that separates growth from contraction.
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USD/JPY
The dollar was sharply lower against the yen on Thursday as investors piled into safe have assets after the Federal Reserve indicated that it may taper its bond buying program. Weak data out of the eurozone and China fuelled concerns over the outlook for global growth. In a testimony to the U.S. Joint Economic Committee on Wednesday, Bernanke said a decision to scale back the Fed’s asset purchase program could be taken in the "next few meetings" if economic data continued to improve. Elsewhere, data showed that China’s manufacturing sector contracted for the first time in seven months in May. The preliminary reading of China’s HSBC manufacturing purchasing managers' index fell to 49.6 in May, below the 50 level that separates contraction from growth down from a final reading of 50.4 in April.
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USD/CAD
The U.S. dollar pulled back from 11-month high against the Canadian dollar in a choppy trade on Thursday, as better than expected U.S. jobless claims data boosted market sentiment. The Department of Labor said the number of people who filed for unemployment assistance in the U.S. last week fell by 23,000 to a seasonally adjusted 340,000, compared to expectations for a decline of 18,000 to 345,000. Jobless claims for the preceding week were revised up to 363,000 from a previously reported increase of 360,000. Investors remained cautious after Federal Reserve Chairman Ben Bernanke said the bank could begin tapering its bond-buying program. In a testimony to the U.S. Joint Economic Committee on Wednesday, Fed Chairman Bernanke said a decision to scale back the Fed’s asset purchase program could be taken in the "next few meetings" if economic data continued to improve.

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