China's manufacturing PMI remains stable in April

Kevin Frayer  Getty Images

Kevin Frayer Getty Images

No change in policy is expected but the market is keen to hear how Powell resolves the divergence between solid economic growth and slowing inflation.

An illustration picture shows euro and USA dollar banknotes and coins, April 8, 2017.

These figures not only worsened concerned about United States price pressures, but also cause a jump in speculation that the Federal Reserve could cut U.S. interest rates sometime this year.

According to a statistician from the National Bureau of Statistics, although down from a month ago, the PMI was still the second high since November and stayed above the boom-bust line for two consecutive months.

A private-sector survey was no better with the Caixin PMI easing to 50.2 in March, from 50.8. "The euro is the biggest short in the market right now", said Steven Englander, global head of G10 FX research at Standard Chartered Bank in NY.

The growth in activity in the large Chinese industry slowed down in April. USA gold futures settled up 0.3 percent at $1,285.70 an ounce.

The dollar index, which tracks the greenback against major currencies, fell to its lowest level since April 23.

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Against a basket of currencies, the dollar was off a fraction at 97.813 but not far from last week's 23-month peak of 98.330.

While the pair avoided the mid-week's three month low of $0.69, the pair still ended the week over a cent lower and has been unable to recover much this week. "Although the dollar is not moving higher on the back of strong macro readings, it is not coming down either; neither are the US long-term rates", Meir added.

USA data overnight showed consumer spending enjoyed the sharpest rebound in 9-1/2 years in March, yet core inflation still slowed to a 14-month low. USD weakened and EUR/USD held up towards the 1.12 mark despite Chinese weakness.

Gold is generally used by investors as a safe-haven investment against economic and political concerns.

Trading volume was muted by Japanese markets being closed for the Golden Week holiday. -China trade deal is likely to be the catalysts behind that trend.

Overnight, Chinese PMIs were weaker than expected: official (NBS) manufacturing PMI fell to 50.1 in April (50.5 in March), short of expectations it would be unchanged after a significant jump in March.

It was up 0.26% at 111.355 yen per dollar, reducing its month-to-date loss to 0.483%.

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