Euro attempts to rally.

The University of Michigan consumer confidence index dipped to 59.1 for May from 65.2 previously which was below expectations of 64.0 and the weakest reading since late 2011. The current conditions index declined to 63.6 from 69.4 while the expectations component dipped to 56.3 from 62.5 and both reading were below expectations.

The 1-year inflation expectations index was unchanged at 5.4% with the 5-year index at 3.0% which may provide an element of relief for the Federal Reserve.

There was further choppy Wall Street trading on Friday, but US equities were able to significant gains with significant short covering an element. There was also a 3.8% rebound in the Nasdaq index.

Chinese industrial production declined 2.9% in the year to April compared with expectations of a 0.4% increase. Retail sales declined 11.1% over the year after a 3.5% retreat the previous month and much weaker than expectations of a 6.0% decline while the official unemployment rate also increased slightly.

The data-maintained unease over the domestic and global outlooks despite a marginal element of optimism over limited re-opening attempts in Shanghai.

Wall Street gains helped underpin global bourses on Friday, but the weaker than expected Chinese data rush increased concerns again on Monday with further unease over the domestic and global outlook.

The Euro remained under pressure on Friday but did manage to hold just above the 2017 lows of 1.0340 which helped trigger a round of short covering and a EUR/USD move back above 1.0400.

Overall, Euro sentiment remained vulnerable, especially given fears over the Euro-zone outlook with EUR/USD around 1.0400 on Monday.

CFTC data recorded a further increase in short, non-commercial Sterling positions to near 80,000 contracts in the latest week from near 74.000 previously and the largest short positions since September 2019. The data will maintain the potential for short covering, but only if there is a trigger for a shift in underlying sentiment.

The market attempted to push the Euro lower again on Friday, but EUR/USD did manage to resist a dip to fresh 19-year lows which triggered a round of short covering to above 1.0400. Overall Euro-zone confidence remain fragile amid fears over a prolonged conflict in Ukraine.

The dollar corrected against commodity currencies which sapped support to some extent. The US currency secured renewed gains on Monday and EUR/USD settled close to 1.0400.

Defensive yen support was hampered by the gains in US equities, but the risk recovery was fragile, especially after the Chinese data. USD/JPY traded close to the 129.0 level on Monday.  USD/CHF held just above parity with yield and risk trends watched closely.

Sterling was able to secure net support on short covering despite weak underlying sentiment. GBP/USD bounced to above 1.2250 before fading slightly on Monday. GBP/EUR rallied above 1.1775.

Sharp moves in equities continued to dominate commodity currencies with renewed selling on Monday as sentiment dipped again. AUD/USD posted net gains to 0.6940 on Friday, before fresh losses to 0.6885 on Monday as the Chinese data undermined sentiment. USD/CAD dipped to the 1.2900 area before a rebound to 1.2960 on Monday.

Economic Calendar

10:00Euro-Zone Trade Balance(MAR)-7.6B
13:15CAD Housing Starts(APR)246.2K
13:30NY Empire State Manufacturing Index(MAY)24.6
13:30CAD Wholesale Sales (M/M)(MAR)0.90%-0.40%
21:00USD TIC Net Long-Term(MAR)141.7B

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.