Debt ceiling talks still in focus.

US initial jobless claims edged higher to 229,000 in the latest week from 225,000 previously, but well below consensus forecasts of 250,000. Continuing claims also declined slightly to 1.79mn from 1.80mn previously.

Fed Governor Collins stated that a pause on rate action would give the Federal Reserve time to measure the impact. She added that inflation is too high, but sees promising signs of moderation.

Futures markets indicated a 45% chance that rates would be increased again in June with close to a 70% chance that rates will be increased by July.

The dollar posted further net gains on Thursday with the currency index at fresh 2-month highs.

There was a limited correction on Friday following reports that Chinese state banks were selling dollars to support the yuan.

UK retail sales volumes increased 0.5% for April compared with expectations of a 0.5% and there was a year-on-year decline of 3.0%.

House Speaker McCarthy stated that there had not been a deal to raise the debt ceiling.

Negotiations will continue with a deal needed over the weekend to give enough time to secure a deal before the June 1st deadline. There is a US holiday on Monday.

Consensus forecasts are for a headline increase of 0.4% with the annual increase slowing to 3.9% from 4.2%. Core prices are forecast to increase 0.3% with the annual increase holding at 4.6%.

The Euro continued to drift lower on Thursday with negative overall sentiment after revised German data recorded a 0.3% GDP decline for Q1. Expectations of further US rate hikes continued to support the dollar EUR/USD dipped to fresh 2-month lows near 1.0700. EUR/USD recovered slightly to around 1.0735 on Friday.

Higher US yields also undermined the yen. Bank of Japan Governor Ueda’s mention of a yield curve control tweak failed to support the yen. USD/JPY hit fresh 6-month highs just above 140.00. Finance Minister Suzuki warned that FX moves were being watched closely with USD/JPY correcting to 139.70.

The Swiss franc regained some ground amid fragile equity markets. EUR/CHF retreated to 0.9715 with USD/CHF advancing to 0.9070 before a retreat to just below 0.9050.

Sterling was unable to make headway despite hawkish Bank of England expectations and higher yields. GBP/USD edged lower to 1.2310 before a recovery to 1.2345.

Commodity currencies remained under pressure amid the firm dollar and weaker US equities. AUD/USD dipped to fresh 6-month lows just below 0.6500 before a slight recovery to 0.6520. USD/CAD advanced to 1-month highs at 1.3640 as oil prices also declined drifted lower.

Economic Calendar

13:30Core PCE Price Index m/m0.3%0.3%

*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.