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Manufacturing Remains Weak in the US

Richmond Manufacturing Index Contracts, Tracking Broad Weakness in the Sector

us-manufacturing

Current conditions in manufacturing, as measured by the Richmond Fed manufacturing index fell to -1 in May from 14 in April. The index slipped back into the negative after managing to break the trend in March, indicating a contraction. The report comes after a slowing flash manufacturing PMI released yesterday, while NY and Philly indices also show contraction.

Australian Dollar Weakens as RBA Warns of Inflation Risks

The Australian dollar came under pressure today as the Reserve Bank of Australia's Governor Glenn Stevens commented that while growth and employment were solid, inflation still remained low. His comments came while speaking at a business luncheon on Tuesday. Speculators saw the comments as a sign that the RBA could look at more rate cuts in the near term. Many economists are of the view that the RBA could cut rates again in August, which comes after the second quarter inflation report due in July. The most recent meeting minutes showed that members were divided, however. The Aussie briefly spiked after the minutes were released but started to decline steadily thereafter.

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German Q1 GDP Confirmed at 0.70%

GDP growth in Germany was confirmed at 0.70% as widely expected, data from German statistics agency Destatis showed on Tuesday. On a yearly basis, German GDP growth rate was confirmed at 1.30%. Demand in Germany picked up mostly from the domestic sector with machinery and equipment rising alongside the construction sector by 1.90% and 2.30%, respectively. Imports growth of 1.40% outweighed the 1.00% seen in exports. German officials are not optimistic on the prospects of future growth, noting that second quarter GDP might slow down. However, in contrast, the German Chamber of Commerce adjusted forecasts up to 1.50%, from previous estimates of 1.30%.

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New Home Sales Rise in April

Sales of newly built homes in the US rose at the fastest pace in 8 years, data from the US Commerce department illustrated Tuesday. Rising 9.70% in April from a year ago, new home sales posted a seasonally adjusted annual rate of 619,000. The positive report on new home sales reflects a broadly optimistic picture on the US housing markets, which got off to a choppy start in the first quarter. Previously, existing home sales, which account for a bulk of the housing market, increased for the second consecutive month - reflecting improved sentiment among home buyers.

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Bank of Canada Expected to Hold Rates Steady

The Bank of Canada will be meeting today at 14:00 GMT for its monthly monetary policy meeting. Economists expect the Canadian central bank to keep monetary policy unchanged with the interest rate steady at 0.50%. In April, Canada's consumer price index measured on a year over year basis showed a 1.70% increase while the core inflation excluding volatile components climbed 2.20%. While inflation is not a worry for the Bank of Canada, economic growth is, and has shown signs of stagnating with retail sales in April indicating a potentially flat GDP. The Bank of Canada is likely to stay on the sidelines and assess economic data further.

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