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GBP:  The Chancellor stands up for his spending review.   This deals with departmental spending, which amounts to around half of government spending.   Should not be a big issue for sterling, because predominantly concerned with the details, rather than big numbers and fiscal tightening. Still, a small volatility risk in case some other surprises are pulled out of the bag.

USD: The GDP data is a revision and further detail to the first quarter numbers, so on the face of it should not be a big deal for the dollar.   The US economy expanded 2.4% in annualised terms in the first quarter.

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The single currency slipping to a 3 week low against the dollar overnight, and also standing as one of the weaker performers on the majors so far this week. Three factors are at play. Rising yields in the US have caused a generalised sell-off in European debt, with peripheral markets such as Spain and Italy hit harder, meaning Italian yields are near the highs of the year (currently near 4.90%), having been at the lows (3.70%) in the early part of May.   Secondly, comments from ECB President Draghi yesterday served to keep alive hopes of further easing.

Finally, with emerging markets suffering, there is a generalised belief that central bank reserve managers may choose to boost their dollar holdings (at the expense of the euro and others) to put them in a better position to support their currencies against an appreciating dollar.   In a relative sense, this could mean that the euro struggles in the coming weeks.

 

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JPY: The yen has had a pretty steady week so far, waiting for inflation data on Friday. The third arrow of Abenomics (structural reforms) is on hold until after the upper house elections next month.   As such, the yen is seeing more two-way traffic vs. the sharp weakening trend of earlier in the year.

More:  Forex Analysis: USD/JPY Partial Recovery Targets Bullish Resumption

AUD: Some signs of recovery in the Aussie, but this largely owing to the over-sold position of the currency after recent sharp losses. There remain plenty of Aussie bears around, who could take this recovery as an opportunity to establish fresh short positions. Note PM Gillard has called a leadership ballot in which she will stand.   Not a great surprise given recent tensions within the party.

CNY:  After the recent rise in money market rates and fall in stocks, markets overall remain nervous in China.   The central bank has selectively supplied liquidity to some banks, but there are other well placed reports that have the authorities talking tough on the lending practices within the economy.