The dollar fell sharply versus a host of currencies late yesterday and overnight, pressured by a drop in US 10 year bond yields to six month lows on the back of a string of disappointing US data. A wave of stop-loss selling, as well as reports of selling by Asian sovereigns, exaggerated the moves in the USD. The drop in the dollar has pushed the euro back above the $1.42 level, with the single currency getting a respite from worries over the possibility of debt restructuring in Greece. The dollar also fell against sterling, while hitting a record low against the Swiss franc and a three year low versus the NZD. It also retreated against emerging Asian currencies such as the Singapore dollar.

If sentiment remains against the dollar the euro could climb further from recent lows, though concerns about Greece remain a cloud including talk that it may not receive its next round of aid from the IMF following comments yesterday from Jean-Claude Juncker, the head of the Euro group finance ministers. Markets will be watching EU sentient and activity surveys today for direction as well as a host of data in the US, including personal income and consumption for April.

Sterling’s bounce versus the dollar was aided by the news from Nationwide UK that house prices rose by a faster than expected 0.3% in May, offsetting the 0.2% fall seen in the previous month. However, the market continues to lack momentum, with prices 1.2% below their level a year ago. UK consumer confidence also jumped in May, with consumers more upbeat about the outlook for the economy and their financial prospects. The Gfk index rose 10 points this month, the second largest monthly jump in the measure. Versus the euro, sterling is off yesterday’s two and a half month lows.

US 1Q GDP REMAINS UNCHANGED at 1.8%

Contrary to expectations for an upward revision, revised Q1 GDP data showed the growth rate unchanged at an annualised rate of 1.8%. Markets had been expecting a rise to 2.0%. There were, however, some revisions to the GDP components. Consumer spending was revised down from 2.7% to 2.2%, which is a cause for concern given the importance of household consumption to overall GDP. There was an upward revision however, to business investment from an annualised growth rate of 1.8% to 3.4%. Exports were also revised upwards. Other US data released yesterday showed that initial claims for unemployment benefits unexpectedly climbed to 424,000 last week from a revised 414,000 in the previous week, highlighting the very slow improvement in the US labour market.