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Yesterday, the Euro rose during the Asian session to 0.87319 against the British Pound reaching the highest price in a week. The EUR/GBP retreated later losing today’s gains and fell to 0.86631 (session low). During the European session regained the upside but failed to hold above 0.8700. The pair closed at 0.86271, down 0.71% from its opening price.

This morning, Eurostat will simultaneously release the unemployment rate and Flash CPI for the entire continent. Unemployment levels for the EU have been hovering around 10.0% for the past few months, and the market expects a repeat of the same this time. On the other hand, inflation has been picking up slowly, and the flash CPI is expected to show an annual rise of 1.4%, exactly like last month and the highest level since end of 2008. In inflation levels continue to rise, the ECB may be forced to alter their firm stance on holding interest rates for “an extended period”.

The number of U.S. workers filing new applications for unemployment insurance fell slightly less than expected last week, government data showed on Thursday, implying only a gradual labor market improvement. In a report, the U.S. Labor Department said there were a seasonally adjusted 448,000 initial claims for unemployment benefits in the week ended April 24, down from 459,000 such claims during the preceding week, whose figure was revised up from 456,000. Economists had expected last week’s figure to come in at 440,000. Following the release of the data, the U.S. dollar was down against the euro, with EUR/USD gaining 0.34% to reach 1.3266 in the forex online market.

Later today, the Bureau of Economic Analysis will release the advanced quarter GDP for the first quarter of this year. After a very strong fourth quarter last year (5.6% growth), which was not accompanied by the same recovery in jobs, economists expect the Q1 the show slower growth. An annual rate of 3.4% is predicted – expect substantial boost in the value of the U.S Dollar if the number comes in better than forecasted.

The Bank of Japan pledged to help lenders provide credit after reports showed the economic recovery isn’t yet strong enough to overcome deflation.  The policy board held the benchmark interest rate at 0.1% and left unchanged a credit program for lenders, which it doubled to ¥20 trillion ($213 billion) last month. “Members shared the view that it was necessary for the bank to make new efforts” to spur the economy, the statement said.

Governor Masaaki Shirakawa instructed staff to examine “ways to support private financial institutions in terms of fund provisioning with a view to strengthening the foundations for economic growth,” the bank said in a statement today. Today’s decision came hours after government figures showed consumer prices slid for a 13th month in March, even as household spending, wages and factory output all gained.

Also out last night, the Japanese Bureau of Statistics reported that Consumer prices excluding fresh food fell 1.2% in March from a year earlier, the 13th straight decline. Other reports showed the export-led recovery is beginning to spread to the domestic economy. Household spending rose 4.4%, the biggest gain since May 2004, and wages advanced for the first time in 22 months. Industrial production climbed 0.3% in March from February, when output declined for the first time in a year.
“The economy’s recovery is steadily continuing,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo. Even so, “deflationary pressures are still deep- seated in the economy,” he said.

While job prospects improved in March, as the unemployment rate unexpectedly rose to 5% as college graduates entered the labor market- the market had expected it to hold steady at lasts months 4.9% rate.

There was little fluctuation in the price of the Yen following these announcements. The USD/JPY, which opened at 93.999, struck of 94.167, to then fall to 93.882.

In the United States, the Federal Reserve said yesterday that the U.S economy continues to strengthen, but that the “slack” left over from the recession was still so large that it expected interest rates to stay near zero for an “extended period”.

The labor market is beginning to improve,” the Federal Open Market Committee said in a statement yesterday in Washington, after last month saying it was “stabilizing.” Officials also said growth in household spending has “picked up recently.”  Federal Reserve Chairman Ben S. Bernanke is contending with an unemployment rate that has been stuck at 9.7% for three straight months even as payrolls started to grow. Fed officials repeated that inflation is likely to be “subdued” and that consumer spending is held back by tight credit and weak income growth.

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, was at 82.254 from 82.381 yesterday, when it rose to 82.714, the strongest since May 2009. The Dollar Index neared an 11-month high before a U.S. Labor Department report today (1330GMT) that economists said will show initial jobless applications dropped by 11,000 to 442,000.

Yesterday in the forex online market, the USD/CAD sunk as low as 1.00725 as investors sought the refuge in currencies of nations with relatively strong balance sheets. The Canadian dollar strengthened for the first time in three days against its American counterpart, to close at C$1.01033, appreciating a total of 0.54% against the USD. The Loonie added to its gains after the Fed restated its intention to keep the benchmark U.S. interest rate near zero for an “extended period.”  Analysts expect that the BOC will raise interest rates in Canada as early as June 1st. Later today, the BOC governor Mark Carney will speak before parliament, in his second of two speeches this week. Carney is expected to give an overview of the economic situation as well provide hints about the pending rate decision.

New Zealand’s central bank kept its benchmark interest rate unchanged at a record low amid “elevated” risks to the global economy and indicated borrowing costs may not need to be increased as much as in previous cycles. “The New Zealand economy is recovering broadly as expected,” Reserve Bank Governor Alan Bollard said in a statement in Wellington yesterday, after maintaining the official cash rate at 2.5%. The governor went on to say that “At the same time, risks to the global outlook remain elevated.”
Bollard has held borrowing costs steady at 2.5% since April 2009 in order to help push the economy out of its worst recession in over 30 years. The New Zealand fell to $0.7170, from around $0.7200 late in New York, moving away from three-month highs of $0.7257 hit last week. It had rallied on speculation that the Reserve Bank of New Zealand (RBNZ) would prepare the ground for rate hikes as early as June. The Kiwi closed at $0.71788, up 0.80% from its opening price.
On the other hand, the Australian dollar held gains at around $0.9240, having jumped over 1% in the previous session, on speculation the Reserve Bank of Australia (RBA) will raise interest rates at its May policy meeting next week. The AUD/USD, which closed yesterday’s trading session at 0.92432, has reached a high of 0.92549 in early this morning.

In Britain, retailers saw continued improvement in underlying sales through April, according to the Confederation of British Industry’s latest distributive trade survey.  While yesterday’s CBI realized sales report came in worse than expected, at 13, it was in line with previous readings (a reading of 0 indicates higher sales volume, below indicates lower). Moreover, according to BBA mortgage approval report, released yesterday, the number of UK mortgage approvals rose 4.6% on the month in March, climbing to a seasonally adjusted 34,905 from 33,360. Remortgaging approvals also rose, to 24,116 from 22,314 in February, while other secured lending approvals increased to 18,331 from 17,829. According to the BBA statistics director, David Dooks, said “Low interest rates continue to influence customer behaviour. Homeowners are reducing mortgage debt by making, or maintaining, higher repayments using the extra cash generated by lower mortgage rates.” The BBA said there was a 4.5% annual increase in banks’ net mortgage lending in March, well above annual growth of just 1% across the whole market in February, with banks continuing to provide the majority of all mortgage finance.

The Pound suffered extensive losses yesterday as concerns over Greece and fears of a “hung parliament” weighed heavily on the currency. The Sterling retreated from Monday’s highs and to a low a one week low of $1.52241, down1.58% from the day’s opening price. The GBP/USD which closed at $1.52444 in the forex online market, continue to fall in trading sessions this morning, touching on $1.52054.

Down under in Australia, the inflation rate almost doubled in the first quarter to 0.9%, making it more likely that the central bank will keep raising borrowing costs. The increase in the consumer price index from the previous three months followed a 0.5% gain in the fourth quarter and was more than the median 0.8% expected by economists. Prices rose 2.9% from a year earlier, the most since late 2008, the Bureau of Statistics said in Sydney early this morning. After falling 1.24% yesterday to close at 0.91631USD, the Australian Dollar rebounded in trading session this morning to hit a high of 0.92299USD.

In New Zealand, Alan Bollard, the governor of the Reserve Bank of New Zealand is expected to hold the official cash rate steady at tonight’s rate decision (2200GMT). Disappointing retail sales along with a meager rise of 0.4% in the quarterly inflation have lead analysts to believe that the RBNZ will hold its overnight rate at 2.5%. Following the cash rate announcement, the RBNZ will make a statement discussing the economic conditions that influenced their decision. Most importantly, it discusses the economic outlook and offers clues on the outcome of future decisions. The kiwi will move by the wording of the RBNZ Rate Statement which will provide an economic overview and perhaps hints for future policy.

The rate announcement will be followed by publication on New Zealand’s trade balance. Over the course of the past two months, the country has enjoyed a rather large surplus. This time around, the surplus is expected to widen to 372M, from 321M last month, indicating an increase in exports.