FX Highlights

• USD is trading higher supported by a dip in risk appetite as the equity market slides on fresh bank worries in reaction to an IMF statement that more banks may have to be nationalized, GBP pressured by S&P downgrade of UK outlook and threat that the UK may lose its top debt rating because of deteriorating UK fiscal outlook, GDP losses limited by UK Treasury statement that they have plans to deal with the budget deficit
•  Japans March tertiary index falls 4%, Japanese government to upgrade Japan's economic outlook, JPY lower
• Australia's February AWOTE rises 1.2%, April vehicle sales rise 0.9%, RBA sold $A512 bln in April, AUD lower
• The Financial Times reports that Spanish banks may be downgraded
• The Telegraph reports that UK banks need more support, UK Q1 business sentiment falls 5.5%, April public sector borrowing at 5.1251 bln, April M4 money supply rises 0.1%, April retail sales rise 0.9%, S&P downgrades UK outlook to negative from stable, Moody says the UK debt rating is not under review, GBP lower
• EU May manufacturing PMI rises to 40.5 compared to 36.8 last month, EUR lower
• The FOMC minutes for the April FOMC meeting state that the FOMC discussed expanding the purchase of long bonds, the FOMC however agreed to wait and see how the economy and financial markets respond to current Fed policy actions before expanding bond purchases, the Fed says that the bond purchases will contribute to boost growth, full recovery may take five years, the minutes did not say if the Fed discussed an exit strategy from quantitative ease
• US equity markets set to open lower, European equities 2% lower, Nikkei closed 80 points lower

Upcoming Events

• US- Thursday, initial jobless claims for week ending in 05/16 will be released expected at 610K compared to 637K last week, April Lei will be released, expected at 0.2% compared to -0.3% last month, along with Philly FED survey which is expected at -19 compared to -24.4 in April
• CAN- Thursday, March wholesale sales will be released expected at -0.4% compared to -0.8% last month, along with March net foreign investment expected at 4 bln compared to 6 bln last month

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