Dollar mixed as soft PPI outweighs falling jobless claims

•     Dollar mixed as soft PPI outweighs falling jobless claims

–    Jobless claims hit the lowest level in 15 years, but the market focused on a soft PPI report for April and the dollar was mixed vs G10 currencies, lower vs EM

–    Fed funds futures shifting from 1^st hike in Sep to Dec

•     Bunds rate disadvantage is lessening; EUR strengthening

–    As Euro bond sell-off continues while US front end gains, Bunds’ rate disadvantage is narrowing and EUR is gaining

–    Likely to continue until ECB purchases push EUR bond yields down again

–    I see improvement in labor market as most important, still expect Sep rate hike = surprise for market, USD rally

•     NZD, AUD are biggest losers on commodity news

–    Fonterra cuts forecast of milk output for next 12 months

–    Australian mining firm to resume iron ore output as prices have recovered

•     Japan PPI plunges into negative territory in April

–    Consumption tax hike falls out of yoy comparison

–    BoJ may do more, but will it have any effect?

•     Today:

–    US: Empire State index for May to improve; industrial production for April to be unchanged after March’s fall; U of M sentiment for May to tick up