The euro exchange rate significantly higher against the U.S. dollar, despite the fact that the key indicators of the service sector and manufacturing continues to indicate a contraction in activity. Note that the activity in the private sector in the euro area fell again in May, which is likely to add to the arguments in favor of more action by the European Central Bank and the government, aimed at stimulating economic growth.

According to Markit Economics published data, preliminary composite purchasing managers' index (PMI) euro zone, the indicator of activity in services and manufacturing rose in May to 47.7 from 46.9. The total value exceeded economists' expectations, but the index is still below 50, indicating a contraction in activity. A reading above 50 indicates an increase in activity. We add that there were no signs that the prolonged decline in activity is close to completion. Purchasing managers reported a decrease in the volume of new orders for 22 months in a row, with the rate of decline accelerating the third consecutive month. Note that to change the dynamics of trade could not even better than expected U.S. data.

According to a report from the Ministry of Commerce, at the end of last month sales of new homes increased significantly, thus surpassing estimates of experts, which is a bullish sign for the housing market in the United States. According to the report, the seasonally adjusted sales of new homes rose in April by 2.3 percent, reaching at the same annual rate of 454,000, compared to the upwardly revised figure for the previous month at 444,000 units. Note that according to the average estimate of economists, new home sales should grow to reach 425,000 units, compared with 417,000, which was originally reported in the previous month, reflecting an increase of 1.9 percent. We also add that the monthly growth reflected the 10.8 percent increase in sales of new homes in the West, as well as a 3.0-percent increase in sales in the South. On the other hand, new home sales in the Northeast fell 16.7 percent, while sales in the West declined 4.8 percent. The Ministry of Commerce also noted that the pace of new home sales increased by 29.0% compared to 352,000 in April 2012.

The British pound rose against the dollar, while the published data reflected that the costs of UK households in the 1st quarter grew at the slowest pace in 18 months, despite a slight increase in earnings in the period. This indicates that the British did not hurry to part with cash in an uncertain economic environment. In its second estimate of GDP for the 1st quarter of the UK National Bureau of Statistics (ONS) on Thursday confirmed that GDP grew by 0.3% compared with the previous quarter and by 0.6% compared to the 1st quarter of 2012. According to the ONS, household spending on goods and services in the 1st quarter were up 0.1%. This is the weakest level since the third quarter of 2011, when spending fell by 0.1%.

The Canadian dollar was higher against the U.S. dollar, which helped the presented data that showed that the number of U.S. workers applying for new unemployment benefits fell last week, suggesting that the slow improvement in the labor market. The number of applications - a preliminary indicator of layoffs, fell by 23,000 to a seasonally adjusted 340,000 in the week ended May 18, the Labor Department said Thursday. Economists had forecast 347,000 new claims last week. The indicator of layoffs back to at least five years. Four-week moving average, which smooths out weekly volatility, fell by 500 to 339,500. Claims for the week ending before May 11 were revised up to 363,000 from a previously reported 360,000. In a report earlier this month, the Labor Department said the unemployment rate fell to 7.5% in April, its lowest level since 2008.

Consumer sentiment in the euro area increased for the sixth consecutive month in May to its strongest level since the middle of last year, preliminary data from the European Commission showed Thursday.

The DG ECFIN flash estimate of the consumer confidence indicator for Eurozone came in at -21.9, up from April's final score of -22.3. Economists were looking for a score of -21.8 for May. The latest reading is the highest since July last year, when the figure was -21.3.

The confidence indicator the EU also improved in May, rising to -20.2 from -20.4.

The commission is set to release the final figure for consumer confidence along with the results of the Business and Consumer Survey on May 30.

EUR/USD $1.2800, $1.2850, $1.2895, $1.2900, $1.2925, $1.2950, $1.2965, $1.3000

USD/JPY Y101.00, Y101.50, Y102.30, Y102.50, Y103.30

EUR/JPY Y133.00

EUR/GBP stg0.8600

AUD/USD $0.9750, $0.9800, $0.9850

U.S. home prices rose again in March, pointing to continued support for economic growth from the housing industry.

Home prices increased 1.3% in March from February on a seasonally adjusted basis, according to the Federal Housing Finance Agency's monthly home-price index released Thursday. Compared with the same month a year earlier, March home prices were up 7.2%.

The index value in March was 199.1, with a reading of 100 equal to the price of homes in January 1991.

The FHFA's index is calculated by using the prices of houses purchased with mortgages backed by government-controlled mortgage companies Fannie Mae (FNMA) and Freddie Mac (FMCC).

The index is roughly the same level as in November 2004.

Rising housing prices encourage builders to break ground on new projects and homeowners to sell their properties and buy new ones. A report Wednesday from the National Association of Realtors said existing-home sales inched up 0.6% in April from a month earlier to a seasonally adjusted annual rate of 4.97 million sales, the highest level since November 2009.

The housing market helped pull the economy into a severe recession, which ended in June 2009. But housing has been a big component of growth of late. Residential fixed investment--which includes home building and household improvements--rose at an annual rate of 12.6% during the first quarter, building on solid gains over the past two years.

First-time claims for U.S. unemployment benefits fell by more than expected in the week ended May 18th, according to a report released by the Labor Department on Thursday.

The report showed that initial jobless claims fell to 340,000, a decrease of 23,000 from the previous week's revised figure of 363,000.

Economists had expected jobless claims to drop to about 345,000 from the 360,000 originally reported for the previous week.

EUR/USD

Offers $1.2950/60, $1.2930, $1.2900/20

Bids $1.2820/00, $1.2790, $1.2770, $1.2750/35, $1.2715/10

GBP/USD

Offers $1.5150/60, $1.5115/25, $1.5100/05

Bids $1.5000, $1.4985/80, $1.4960/50, $1.4910/00

AUD/USD

Offers $0.9800, $0.9780, $0.9750/60, $0.9700/10

Bids $0.962/20, $0.9550, $0.9500, $0.9450

EUR/GBP

Offers stg0.8650/60, stg0.8620, stg0.8600, stg0.8565/70

Bids stg0.8445/40, stg0.8430/20, stg0.8400

EUR/JPY

Offers Y133.00, Y132.50, Y131.95/00, Y131.80, Y131.45/50, Y131.10/20

Bids Y130.20, Y1290.50, Y129.00, Y128.50

USD/JPY

Offers Y103.45/50, Y103.00, Y102.75/80, Y102.45/50, Y102.00/10, Y101.80

Bids Y100.50, Y100.00, Y99.60/50

Tail calculations:

- 3.30% Jul 2016 Bono; 3.0bps vs 2.1bps prev

- 4.50% Jan 2018 Bono; 3.1bps vs 1.8bps prev

- 5.90% Jul 2026 Obligacion; 1.8bps vs 1.8bps prev

Tesoro releases further auction results:

- Sold 3.30% July 2016 Bono at avg yield 2.442% vs 2.247% prev

- Sold 4.50% Jan 2018 Bono at avg yield 3.001% vs 2.789% prev

- Sold 5.90% July 2026 Obligacion; avg yield 4.54% vs 4.336% prev.

Tesoro sold E4.076bln vs target E3.0bln-E4.0bln

- E1.58bln of 3.30% July 2016 Bono, cover 2.24 vs 2.34 previous

- E1.345bln of 4.50% Jan 2018 Bono; cover 1.94 vs 2.24 previous

- E1.152bln of 5.90% July 2026 Obligaciones; cover 1.55 vs 1.62 previous

EUR/USD $1.2800, $1.2850, $1.2895, $1.2900, $1.2925, $1.2950, $1.2965, $1.3000

USD/JPY Y101.00, Y101.50, Y102.30, Y102.50, Y103.30

EUR/JPY Y133.00

EUR/GBP stg0.8600

AUD/USD $0.9750, $0.9800, $0.9850

01:00 Australia Consumer Inflation Expectation May +2.2% +2.3%

01:45 China HSBC Manufacturing PMI (Preliminary) May 50.4 50.5 49.6

05:00 Japan BoJ monthly economic report May

The Dollar Index touched an almost three-year high before U.S. data forecast to show jobless claims decreased and home sales rose, adding to the case for the Federal Reserve to reduce monetary stimulus. U.S. government data due today may show the world's biggest economy is picking up. The number of applications for unemployment insurance payments probably fell to 345,000 in the week ended May 18 from 360,000 the prior week, according to the median estimate of economists surveyed by Bloomberg News.

Sales of newly built houses increased to a 425,000 annualized rate in April, a three-month high, from 417,000 a separate poll of economists shows.

The greenback strengthened against most major peers and Treasury yields rose to the highest in two months after Fed Chairman Ben S. Bernanke said yesterday the central bank may taper monthly bond purchases if it's confident of sustained gains in the economy.

Australia's dollar slid to an 11-month low as a private report showed China's manufacturing is contracting for the first time in seven months. The preliminary reading of a Purchasing Managers' Index for China's manufacturing declined to 49.6 in May from 50.4 the previous month, HSBC Holdings Plc and Markit Economics said today. The level of 50 is a dividing line between expansion and contraction.

Separate reports from Markit Economics will probably show today that contraction in the German and French manufacturing industries is continuing. The purchasing managers' index for Germany (PMITMGE) is estimated at 48.5 from 48.1 in April and that for France (PMITMFR) at 44.7 versus 44.4, according to economist projections.

The yen gained on speculation its two-day slide was excessive. The yen's 14-day relative strength index versus the dollar was 34, after yesterday touching 30, which indicates an asset's price has fallen too rapidly and may be poised to reverse course. The Japanese currency's RSI against the euro was 39.

EUR / USD: during the Asian session the pair fell to $ 1.2825

GBP / USD: during the Asian session the pair fell to $ 1.5010

USD / JPY: during the Asian session the pair fell below Y103.00

Focus this morning will be on the release of flash EZ PMI data (France at 0658GMT, Germany 0728GMT, EZ 0758GMT). Data viewed as more forward looking with market looking to see if it signals improvement in recently released soft GDP data in Germany and France. Fed Bullard speaks in London at 1005GMT, with US weekly jobless at 1230GMT to provide afternoon focus.

(pare/closed(00:00 GMT +02:00)/change, %)

EUR/USD $1,2852 -0,41%

GBP/USD $1,5043 -0,70%

USD/CHF Chf0,9790 +0,90%

USD/JPY Y103,12 +0,60%

EUR/JPY Y132,54 +0,19%

GBP/JPY Y155,10 -0,12%

AUD/USD $0,9689 -1,17%

NZD/USD $0,8056 -1,37%

USD/CAD C$1,0370 +0,98%

01:00 Australia Consumer Inflation Expectation May +2.2%

01:45 China HSBC Manufacturing PMI (Preliminary) May 50.4 50.5

05:00 Japan BoJ monthly economic report May

07:00 France Manufacturing PMI (Preliminary) May 44.4 44.8

07:00 France Services PMI (Preliminary) May 44.3 44.7

07:30 Germany Manufacturing PMI (Preliminary) May 48.1 48.9

07:30 Germany Services PMI (Preliminary) May 49.6 50.2

08:00 Eurozone Manufacturing PMI (Preliminary) May 46.7 47.1

08:00 Eurozone Services PMI (Preliminary) May 47.0 47.4

08:30 United Kingdom Business Investment, q/q Quarter I -0.8% +1.7%

08:30 United Kingdom Business Investment, y/y Quarter I +0.8%

08:30 United Kingdom GDP, q/q (Revised) Quarter I +0.3% +0.3%

08:30 United Kingdom GDP, y/y (Revised) Quarter I +0.6% +0.6%

10:05 U.S. FOMC Member James Bullard Speaks

12:30 U.S. Initial Jobless Claims May 360 347

13:00 U.S. Manufacturing PMI (Preliminary) May 52.1 52.3

13:00 U.S. Housing Price Index, m/m March +0.7% +0.9%

13:00 U.S. Housing Price Index, y/y March +7.1%

14:00 Eurozone Consumer Confidence May -22.3 -21.8

14:00 U.S. New Home Sales April 417 429

17:30 Eurozone ECB's Jens Weidmann Speaks

19:30 Eurozone ECB Presiden3t Mario Draghi Speaks

22:45 New Zealand Trade Balance, mln April 718 480