Soft US data to cut into USD gains
The USD has been resilient to Wednesday’s soft US data. This suggests that an on-going trend of weakening US data is required to trigger investors to take profit on their long USD positions. Today sees the release of the Philadelphaia Fed survey, which we expect to echo the weakness seen yesterday. April CPI is also likely to be soft. Our economics team have revised down their headline estimate to negative 0.4%m/ m from -0.3%m/m following the weak PPI report on Wednesday. Core CPI is expected to rise 0.2%m/m but our economists view that the risks are to the downside. We expect weekly jobless claims to rise to 330k after falling to 323k last week, while a retreat in April new home sales from the March post crisis highs should round out the day. We maintain the view that US activity data ahead will be too soft to support Fed exit expectations and, with the current elevated level of US yields, we view that the USD’s recent strength is vulnerable to unwinding, particularly against the EUR, GBP, AUD and NZD.
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BNP Paribas