Daily Morning Report 28.05.2015

The Japanese yen weakened on Thursday as the market assessed the April retail sales data and the prospects for continued easy monetary policy. USD/JPY traded at 123.80, up 0.13%, while AUD/USD changed hands at 0.7691, down 0.56% on week capex data. EUR/USD was quoted at 1.0915, up 0.10%. In Japan, retail sales rose 5.0% year-on-year in April, the first rise in four months. The data comes after the government and Bank of Japan earlier this month revised up their assessments of consumption after a long slump caused by the April 2014 tax hike. In Australia, first quarter total capex fell 4.4% quarter-on-quarter, likely disappointing policy makers who view investment plans a key for the rate outlook. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.04% to 97.30. Overnight, the dollar trimmed gains against a basket of other major currencies in quiet trade on Wednesday, as investors locked in gains from the greenback’s recent upward trend, although expectations for higher U.S. interest rates later this year continued to support. Demand for the dollar continued to be underpinned after data on Tuesday showed that U.S. business investment plans increased, consumer confidence improved and house prices extended gains. The upbeat data supported the view that the Federal Reserve could start to raise interest rates later in the year if the economy continues to improve as expected. In Japan, Wednesday’s minutes of the central bank’s April meeting showed policymakers pushed back the time frame for achieving its 2% inflation target, fuelling expectations for additional monetary easing later this year. The single currency rebounded from session lows following reports the Greek government and its creditors have started drafting a staff-level agreement, boosting hopes that an final agreement on a cash-for-reforms deal is growing closer. Earlier Wednesday, Athens expressed confidence that it would make a €305 million payment to the IMF due on June 5. The Greek government had previously warned that it would be unable to make the repayment if a deal with its international lenders was not reached by then.

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