The US dollar and Japanese yen fell this afternoon as risk appetite picked up on reports that the Federal Reserve has decided to scale back some of their liquidity programs, suggesting that conditions have improved.
Meanwhile, the Commerce Department said that the final reading of US Q1 GDP was revised up to -5.5 percent from -5.7 percent. However, there weren’t many bright spots in the report as changes to the components included revisions in personal consumption to 1.4 percent from 1.5 percent, gross private investment to -48.9 percent from -49.3 percent, exports to -30.6 percent from -28.7 percent, and change in inventories to -$87.1B from -$91.4B.
At the same time, the Labor Department reported that initial jobless claims jumped by 15,000 to a 5-week high of 627,000 during the week ended June 20, while continuing jobless claims rose by 29,000 to 6,738,000 during the week ending June 13. All told, the news runs counter to the optimism surrounding last week’s jobless claims and suggests that the next round of US non-farm payrolls will continue to reflect job losses and a rising unemployment rate.
On Friday morning, the Commerce Department is anticipated to say that both personal income and personal spending results for the month of May improved by 0.3 percent. That said, traders should be skeptical of the income result: past increases have been purely the result of rising transfer payments, which include retirement, disability, and employment insurance, while wage and salary compensation has either fallen or stagnated since September 2008. At the same time, the savings rate has surged in recent months, which helps to explain why spending has fallen negative during the past two months. With both demand for and supply of credit still fairly tight, rising savings and lower spending are likely to become persistent trends.
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