Canadian Consumer Price Index rose to 0.4 per cent in April, 0.2 per cent higher than projected and 0.1 per cent more than the previous figure as the Statistics of Canada reported today. The increase in the Inflation measure was mainly due to transportation and clothing costs, energy prices are increasing at slower pace and prices for food increased 2.5 per cent in April. On a yearly basis the Core CPI excluding eight volatile items rose 2.1 per cent in April compared with previous year’s CPI at 1.9 per cent. The Governor of the Bank of Canada Mark Carney reported today it “may become appropriate” to raise the key 1 per cent interest rate, as the inflation and growth are stronger than they were estimated.

The euro dropped to a four-month low, extending losses against the dollar in Asian trading hours amid concerns the euro area’s debt crisis is deepening. Pair EUR/USD has already touched 1.2655, the lowest since January 17, while EUR/JPY fell to 100.22, the lowest since February 6. Yesterday the rating agency Fitch downgraded Greece’s long-term credit rating to CCC from B-, indicating “the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union” before the nation faces new parliamentary elections in June. Rising borrowing costs for Spain at yesterday’s medium-term auction also added pressure on the single currency. Another international credit agency Moody’s Investors Service downgraded yesterday 16 Spanish banks.

The US dollar on the other hand is accelerating gains against the majors, but the Japanese yen, lifting the dollar’s index, used by Intercontinental Exchange, toward the 2012 high at 81.784. By the end of the Asian trading session the Aussie dropped versus the US counterpart to the lowest since 25 of November 2011 - 0.9794, the British pound weakened to a two-month low of 1.5732. The greenback also strengthened against its northern counterpart, the loonie, to 1.0226, and to 0.9490 versus the Swiss franc – both values are the highest since January. Probably the only major currency outperforming the dollar in May is the Japanese yen. Pair USD/JPY fell yesterday evening to a three-month low of 79.13, having lost almost 0.7% from the beginning of May. The worst performer is the Australian dollar, which has lost almost 6% versus the greenback in May.

The index of U.S leading indicators dropped by -0.1 per cent in April unexpectedly after advancing for six consecutive months, the forecast was an increase of 0.1 per cent. The latter indicates that the U.S economy is losing momentum as Americans added jobs at a slowest pace, declining building permits and weaker consumer confidence. Philly Fed Manufacturing fell by 5.8 while it was anticipated to increase by 10.8 as the Federal Reserve Bank of Philadelphia reported today, the previous figure was at 8.5.

The initial U.S Jobless Claims are unchanged at 370,000 as the Labor Department reported today and 2,000 higher than the forecast. The previous week claims were revised at 370,000 from 367,000. The number of Americans filed application for unemployment benefits remain stable and that shows no improvement in the labor market, economists say that further growth is needed to bring down the unemployment rate. At the FED meeting minutes release yesterday was made clear that several members said new actions could be needed if the U.S economy loses the positive momentum.

The single currency remains under pressure against the dollar, having touched yesterday a four-month low 1.2681. In Asian trading hours and at the beginning of the European trading session today the pair have been fluctuating around 1.2700 amid Spain’s GDP growth data reading and Spanish debt auction. The official data showed today that the nation’s GDP contracted by 0.3% in the first quarter of the year, following an equal 0.3% drop in the last quarter of 2011. Annualized growth pace reached minus 0.4%, the first drop since the first quarter of 2010, compared with the previous 0.3% annualized gain in the fourth quarter of 2011.

Today Spain’s Treasury sold 2.5 billion euros of bonds maturing in 2015 and 2016 having to offer higher required yields in comparison with previous auctions. Prime Minister Mariano Rajoy said recently that Spain is facing risk of loosing access to debt markets and that spending cuts is exactly what could protect the nation. The yield of the Spanish 10 year bonds is still elevated – at around 6.3% after rising yesterday above 6.5%, the highest since November 2011. At the same time the spread with German government securities yielding 1.46% has widened considerably in May, surging to almost 500 basis points.

The Federal Reserve April 24-25 meeting minutes were released yesterday and the major points reported are that most FOMC members noticed a decline in jobless rate, they saw a decreased inflation rates, they forecast unemployment to be above target at the end of 2014 and that inflation will be below 2% at the end of 2014. Some members were confident about consistent recovery and the FOMC participants said that additional easing may needed if the risks to the economy grow great enough. The main risks for the U.S economy are the Europe’s sovereign debt crisis and the spending cuts accompanied with tax increases which can damage growth. Compared to the previous meeting minutes, only a couple of members supported for further asset purchases. Lastly, FED said that for the rest of the year meetings will be for two days to allow for more discussion.

Japan’s economy grew by 1.0% in the first quarter of the year, according to the official data, while consumer spending and public investment have made major contributions to the expansion. The previous -0.2% contraction in the last quarter of 2011 was revised upwards suggesting no change in the seasonally adjusted real GDP growth. The first-quarter annualized growth pace reached 4.1%, compared with 3.5% expected on average by analysts. Japanese Economy Minister Motohisa Furukawa said today that the government will continue to monitor economic conditions and will act against excessive currency moves if necessary. Pair USD/JPY traded in Asian hours at 80.24-80.40, close to yesterday’s two week high of 80.55.

U.S Housing Construction rise to 717,000 in April, from March revised number of 699,000 and higher than anticipated as the Commerce Department reported today. The Housing Starts data are trending upwards the last years and the todays reported figure is the highest since December 2008. The private Building Permits figure however dropped to 715,000 from the previously revised figure at 769,000, it was lower than the anticipated 730,000. Three years after the recession ended the housing market in U.S is improving further helped by the increase in employment, cheaper homes and low mortgage rates.

The Governor of the Bank of England, Mervyn King at its speech today said that the British economy is threatened by the Euro-zone political uncertainty and sovereign debt crisis. Policy makers added have to take hard decisions as the U.Ks growth forecasts are lowered and short-term outlook about the inflation is raised. Inflation will drop after two years at 1.6%, remaining above the 2% target for longer than earlier predicted in February, furthermore GDP growth forecasts are at lower levels because of the government’s fiscal measures, concerning global economy and tight credit conditions. Labor Market data earlier today indicated that Unemployment fell by 0.1 per cent in the first quarter and was better than projected, jobless claims fell by 13,700 from March giving signals of stability.

The British pound versus the greenback penetrated yesterday the 1.6000 psychological-support level and dropped to the 1.5900 support level after the governor’s speech, it was lastly seen at the 1.5911. The trend is negative for the cable on the hourly chart trading below the Moving Average 50 or 100 and creating lower lows. Against the euro the sterling has been strengthening in recent trading sessions, the EURGBP fell to the 0.7950 support level on Wednesday morning before it bounced up to the 0.7992 level during the BOE report.

Eurostat, the European statistics agency, reported today that the region’s annual inflation rate was 2.6% in April 2012, compared with the previous rate of 2.7% in March. Monthly CPI growth pace decreased from 1.3% to 0.5%. All in all the changes are coming in line with the central bank’s projections, which state that annual inflation rates should fall below 2% again in early 2013.

Another report from the Eurostat informed that the euro area’s exports decreased by 0.9% in March after rising in February by 2.2%. However, even deeper decline in imports of 1.1% over the same period resulted in a widened March’s trade surplus of 4.3 billion euros, compared with 4 billion euros in February in seasonally adjusted figures.