Evening Report-May 06.

Indian rupee traded weaker and closed at 49.59 weighed down by an over-1 percent drop in domestic shares but the weakness in the dollar index helped it trim some of its earlier losses.The upcoming ADP employment report could spark considerable volatility today for Dollar as the indicator has become an accurate predictor of the more closely watched Non-farm payroll report. The economy is expected to have lost 645,000 private jobs which is considerably less than the 742,000 the month prior. A better than expected print would add to the building optimism for the U.S. economy and could fuel risk appetite and weigh on the dollar. The greenback has come under pressure during European trading after posting gains throughout the Asian session as markets have started to look past tomorrow’s bank stress test results.The Euro dropped to as low as 1.3250 during Asian trading on a story that Bank of America needed to raise $34 million but started to find support ahead of the March Euro Zone retail sales release. Consumption in the 16 member economic union fell by a record 4.2% from a year ago against expectations for a 2.6% decline. Consumers cut their food purchases by 5.2% as they continue to retrench with the recession deepening. However, the month of March’s 0.6% drop isn’t that much of a surprise given that labor conditions continue to deteriorate especially in Germany the regions largest economy. The weak retail sales conflicts with the improving sentiment readings that we have been seeing from the region and will make the ECB’s job more difficult. It is the central bank’s preference to wait and see if their previous efforts are impacting growth allowing them to refrain from slashing their benchmark to a record low %1.00. However, inflation and growth risks remain to the downside and with the U.S. and U.K. recessions showing stronger signs of slowing, the pressure is on the committee to catch up in their policy actions. The looming rate decision has help limit Euro gains as the currency has found strength on the improving outlook for the global economy. The pound fell to 1.500 during Asian trading but building support was reinforced by a stronger than expected PMI service reading sending it back above 1.5120 against the dollar. The service sector gauge rose to 48.7 from 45.5 in March on the back of increasing new business which jumped to 48.2 from 44.1. The sector still remains in contraction but is closing in on the 50 boom/bust level and beat expectations of 46.6 continuing the theme for U.K. fundamentals. However, not all the data has been positive as the Halifax house price reading showed the largest annual decline since 2002 of 17.7%. Additionally the growth prospects are already limited by the increasing tax burden for Britons. The BoE is expected to stand pat at tomorrow’s rate decision as they have exhausted their efforts to boost growth. The yen rose on concern that U.S. regulators will say Bank of America Corp. needs $34 billion in new capital, boosting demand for safety