The dollar's post-FOMC minutes rebound reversed on Thursday as yields gave back Wednesday's gains amid doubts the Fed will unwind pandemic easing policy sooner given indications reaching their employment goals may prove more difficult than thought.
Strong bull flattening of the Treasury yield curve narrowed yield spreads over bunds and JGBs, while husbanding the recovery in stocks, and other higher risk assets, to the detriment of the haven dollar.
Divergence between falling initial, and rapidly rising continuing, jobless claims fed anxiety that the reduction in the jobless rate could take longer than expected, and may be restrained until September, when supplemental unemployment benefits are set to expire and most schools are expected to reopen for in-person classes nL2N2N62GP.
Labor supply and supply-chain tightness were on display in the Philadelphia Fed's May manufacturing report.
There's a growing sense from recent data that the speed of the economic recovery is being slowed by supply-side constraints that leave orders unfilled.
Unfilled orders jumped 13.2 to 40.4, well above April's prior record high of 27.2, while the prices paid index hit a red hot 76.8 from 69.1.
EUR/USD is up 0.34% and within easy reach of Wednesday and February's highs at 1.2245/435, with 1.2250 seen as the inflection point toward January's 1.2490 peak nL2N2N71N7.
Euro also likely benefited after ECB's chief economist, Philip Lane, pushed back against talk of a new era of higher inflation nL5N2N739H.
Sterling is up 0.5%, also getting a lift from falling Treasury yields and rebounding stocks, as well as the CBI reporting the fastest growth in manufacturing orders since December 2017 nL5N2N73A0.
But cable is still staring at a major cluster of long-term resistance at, and just above, its 1.4240 year-to-date high.
In fact, this week's 1.4220 peak brushed up against this barrier before the Fed minutes sent prices lower.
USD/JPY is down 0.37% in line with the roughly 5bp drop in 10-year Treasury-JGB yield spreads.
Prices have fallen below the up trendline from January, Thursday at 109.01, for the 8th time in five weeks, but have yet to close below it.
May's 108.34-9.785 consolidation range on EBS would look more susceptible to a breakdown after a clear close below the up trendline, but May's low looks more pivotal ahead of May PMIs Friday nL2N2N71N1.
Strong Japanese exports in April suggest the economy may better weather current lockdowns with external demand support nL3N2N625A.
Aussie is up with the broader recovery in risk acceptance and lower Treasury yields in the wake of reasonable April jobs data nAZN0QYZ00, but also amid the RBA's aggressive wage growth target nRUAIGEHAP, and China's attempt to address soaring commodity prices nL2N2N61B1, that could be headwinds for Aussie.
The focus Friday is on global PMIs for May.
The U.S. also has existing home sales that have come off post-GFC and pandemic peaks, but remain quite high.
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