Weak U.S. data sends dollar lower, Wall Street seen down

Thu May 16, 2013 9:22am EDT
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By Richard Hubbard

LONDON (Reuters) - Surprisingly weak U.S. housing and labor market data erased the dollar's gains against the euro and the yen on Thursday and pointed to a lower start on Wall Street.

The number of Americans filing new claims for unemployment benefits climbed last week at the fastest pace in six months, a worrisome sign for the economy which has been hit by government austerity.

In other data, U.S. consumer prices fell in April by the most in more than four years on tumbling gasoline prices, while ground-breaking for new U.S. homes plummeted more than expected from a near five-year high.

The dollar dropped 0.2 percent against the euro to trade at around $1.2908. It had been flat at $1.2884 just before the data. It also traded at 102.18 yen, down 0.1 percent on the day reversing a 0.3 percent gain earlier.

The dollar's earlier strength came on talk of a tapering back in asset buying by the U.S. Federal Reserve, fuelled by Philadelphia Fed president Charles Plosser, who stressed the need for a slowdown in quantitative easing at a speech in Italy.

"Any signs of a tapering in quantitative easing by the Fed is able to have profound impact on market psychology and pricing," said Stephen Gallo, European head of FX strategy at BMO Financial Group.

S&P 500 futures fell 1.9 points after the data and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures fell 16 points and Nasdaq 100 futures rose 9 points.   Continued...

A man walks through the lobby of the London Stock Exchange August 5, 2011. REUTERS/Suzanne Plunkett