Euro-Zone inflation declines sharply.

The headline Euro-Zone inflation rate declined to 6.1% for May from 7.0% for April and below consensus forecasts of 6.3%. The core rate also declined to 5.3% from 5.6% and below expectations of 5.3%.

US ADP data recorded an increase in private payrolls of 278,000 for May following a revised 291,000 increase the previous month and above consensus forecasts of 175,000. The gains were concentrated in the leisure sector and there was a significant decline in manufacturing jobs. There was a further slowdown in wages growth, especially for job changers.

The ISM May manufacturing index edged lower to 46.9 from 47.1 which was marginally below consensus forecasts and the seventh successive reading in contraction territory. Production did increase marginally for the month, but new orders contracted at a faster rate.

Employment increased slightly on the month while prices moved slightly lower on the month with the index below 45.0.

US initial jobless claims increased slightly to 232,000 in the latest week from 230,000 previously and close to consensus forecasts of 235,000.

The challenger data recorded 80,000 layoffs in May from 67,000 the previous month and an annual increase of over 285%. Excluding 2020, layoffs for the first five months of the year were the highest since 2009 with the lowest hiring figure since 2016.

Philadelphia Fed President Harker stated that he backed a skip for at least one meeting.

With weaker ISM pricing data, there was a further net shift in expectations with Fed Funds futures indicating that the chances of June rate hike had dipped to near 25%.

The US currency overall lost further ground on Thursday after the data and Fed rhetoric. The dollar index dipped to 1-week lows with a rebound in European and commodity currencies.

The Senate voted in favour of the debt-ceiling Bill with a comfortable majority and the legislation will now be signed into law by President Biden.

UK mortgage approvals declined to 48,700 for April from a revised 51,500 the previous month and well below consensus forecasts of 54,000. There was also a net decline in mortgage lending.

Excluding the covid period, this was the largest decline in lending since the survey started in 1993.

The US jobs report will be released on Friday and will be important for expectations surrounding the US economy and Fed policy. Consensus forecasts are for an increase in non-farm payrolls of just below 200,000 from 253,000 previously. The unemployment rate is forecast to edge higher to 3.5% from 3.4% with a 0.3% increase in average earnings.

The Euro was resilient after the latest Euro-Zone inflation data. Hawkish rhetoric from ECB Lagarde helped underpin the single currency. Mixed US data releases failed to underpin the dollar, especially with weaker ISM pricing data. EUR/USD found support at 1.0660 and advanced strongly to 1.0760 as the dollar faded

Lower US yields undermined the US currency and underpinned the yen. USD/JPY was unable to break 140.00 and dipped sharply to below the 139.00 level.

The Swiss franc overall edged lower. EUR/CHF edged higher to 0.9755 with USD/CHF retreating to below 0.9050.

Sterling posted further gains on Bank of England expectations despite fragile housing data. GBP/USD found support close to 1.2400 and posted strong gains to near 1.2550 before settling around 1.2530.

Commodity currencies rallied strongly as the US dollar faded. AUD/USD rebounded to 0.6580 with further gains to 1-week highs just above 0.6600 on Friday. USD/CAD dipped to 2-week lows below 1.3450 as oil prices also recovered.

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