Apparently the SIXTH time is the charm for the EUR/USD, which has finally burst comfortably through the 1.30 level. At this point, a deep retracement would be needed to cause the EUR/USD to end the NY trading session below 1.30. Anything can happen during the North American session but with no major event risk left for the day, the better than expected jobless claims report favors a move above 1.31.

The latest jobless claims report shows improvement in the U.S. labor market. Even though weekly jobless claims and the less volatile 4 week moving average remains above 450k, the fact that claims did not rise for the second week in a row is a relief. Weekly claims fell 11k to 457k. However it is cold relief as the amount of continuing claims rose by 1.8 percent to 4.565 million. The unemployment roll remains massive and it will take some time before it comes down from stratosphere, letting the rays of sunshine back into the U.S. economy. Despite the better than expected jobless claims report and the pickup in risk appetite, the dollar continued to sell-off against the Japanese Yen after Bernanke put a knife through the dollar last week. 

Flip-flopping by the IMF?

Meanwhile, the IMF continues to make comments about the China and its currency after their annual staff consultations with the Chinese government. Earlier this week in the summary of their annual review on Chinese policies, it appeared that the IMF softened their tone on Yuan revaluation by saying that the Yuan is only undervalued and not "substantially undervalued." However this morning, the IMF returned to their view of substantial undervaluation of the Yuan. This flip-flopping is a clear indication of how difficult it is for foreign bodies to get their hands Yuan policy. The IMF believes that over the next 5 years, China's current account surplus will reach 8 percent of GDP, a forecast that China does not agree with. Unsurprisingly, the IMF and China also disagreed on the currency. The IMF said this morning that the People's Bank of China believes inflation is benign and therefore they see "less need" to raise interest rates. After China announced a more flexible Yuan policy before the G20 meeting, some economy watchers believed they would follow up with a rate hike later this year but the IMF's latest comments suggest otherwise because the PBoC is worried that higher rates would spur capital inflow.