Foreign Exchange Market Daily Update
The US dollar continued its momentum touching 2 month highs against the yen, and pushed higher across the board after employment data came in above expectations. The labor department sighted that the U.S. economy lost just 20,000 jobs in April, better than the forecast calling for a loss of 78,000 jobs. The figures helped to support the view that the economic slowdown isn't as severe as many had thought and firms analyst's views that Wednesday's Fed rate cut to 2 percent could be the last in a serious of rate cuts seen since last year.
In other news the U.S. Federal Reserve announced that it will boost liquidity by expanding its Term Auction Facility to $75 billion, as well as, its swap agreements with other central banks.
Look for the dollar to remain well supported today as the market digests the positive employment data.
The Euro continued its fall against the dollar posting 6 week lows after the release of better-than-expected employment figures out of the U.S. Also releasing out of Germany was retail sales figures, which came in below forecast at -.01 percent month/month and -6.3% year/year, while, PMI manufacturing came in 0.1 percent below the consensus for a reading of 50.7. Look for the euro to remain range bound as the market awaits next weeks ECB meeting, where expectations remain that interest rates will hold at 4 percent.
Sterling weakened against its U.S. counterpart, but managed to touch a five-week high against its European counterpart as weak UK housing data was pushed aside and a large euro/sterling sell order moved the market. Despite the release of UK house prices sighting a fall for the first time since the late 1990s, sterling remained firm due to the market pricing in the weak figures and anticipating two more interest rates cuts by year end taking the overnight rate to 4.5 percent.
The Japanese yen remained under pressure as the dollar pushed the currency pair above 105. With little data due out of Japan and holidays next Monday and Tuesday, look for USD/JPY to remain under pressure.
The Canadian dollar fell against the greenback after the strong employment report released out of the U.S. The loonie, however, managed to hold its ground on the crosses (euro, yen and sterling) with oil recovering from yesterday's lows. Look for the loonie to remain under pressure as the dollar holds on to its gains.
The Australian dollar held its ground on better-than-expected retail sales, however, the currency's gains remained limited due to lower gold prices. Australian retail sales rose 0.5 percent in March, above forecasts for a 0.3 percent rise. The retail sales figures help to support the view that the Reserve Bank of Australia may be able to hold rates steady at their current level of 7.25 percent. Look for Aussie, however, to remain under pressure as commodity prices push lower.
The New Zealand dollar held steady following its Australian counterpart. Analysts will start to look towards New Zealand jobs and wages data due next week. The labor cost index is due on Monday, while the household labor force survey will release on Thursday. Any indication of weakness in these reports will push the kiwi lower.
The Mexican peso continued to push higher against its U.S. counterpart as local stocks lifted. With the market back from the International Workers' Day holiday yesterday in Mexico, look for the peso to hold on to its current gains.
Union Bank of California
The Bank of Tokyo-Mitsubishi Group
http://www.uboc.com
The US dollar continued its momentum touching 2 month highs against the yen, and pushed higher across the board after employment data came in above expectations. The labor department sighted that the U.S. economy lost just 20,000 jobs in April, better than the forecast calling for a loss of 78,000 jobs. The figures helped to support the view that the economic slowdown isn't as severe as many had thought and firms analyst's views that Wednesday's Fed rate cut to 2 percent could be the last in a serious of rate cuts seen since last year.
In other news the U.S. Federal Reserve announced that it will boost liquidity by expanding its Term Auction Facility to $75 billion, as well as, its swap agreements with other central banks.
Look for the dollar to remain well supported today as the market digests the positive employment data.
The Euro continued its fall against the dollar posting 6 week lows after the release of better-than-expected employment figures out of the U.S. Also releasing out of Germany was retail sales figures, which came in below forecast at -.01 percent month/month and -6.3% year/year, while, PMI manufacturing came in 0.1 percent below the consensus for a reading of 50.7. Look for the euro to remain range bound as the market awaits next weeks ECB meeting, where expectations remain that interest rates will hold at 4 percent.
Sterling weakened against its U.S. counterpart, but managed to touch a five-week high against its European counterpart as weak UK housing data was pushed aside and a large euro/sterling sell order moved the market. Despite the release of UK house prices sighting a fall for the first time since the late 1990s, sterling remained firm due to the market pricing in the weak figures and anticipating two more interest rates cuts by year end taking the overnight rate to 4.5 percent.
The Japanese yen remained under pressure as the dollar pushed the currency pair above 105. With little data due out of Japan and holidays next Monday and Tuesday, look for USD/JPY to remain under pressure.
The Canadian dollar fell against the greenback after the strong employment report released out of the U.S. The loonie, however, managed to hold its ground on the crosses (euro, yen and sterling) with oil recovering from yesterday's lows. Look for the loonie to remain under pressure as the dollar holds on to its gains.
The Australian dollar held its ground on better-than-expected retail sales, however, the currency's gains remained limited due to lower gold prices. Australian retail sales rose 0.5 percent in March, above forecasts for a 0.3 percent rise. The retail sales figures help to support the view that the Reserve Bank of Australia may be able to hold rates steady at their current level of 7.25 percent. Look for Aussie, however, to remain under pressure as commodity prices push lower.
The New Zealand dollar held steady following its Australian counterpart. Analysts will start to look towards New Zealand jobs and wages data due next week. The labor cost index is due on Monday, while the household labor force survey will release on Thursday. Any indication of weakness in these reports will push the kiwi lower.
The Mexican peso continued to push higher against its U.S. counterpart as local stocks lifted. With the market back from the International Workers' Day holiday yesterday in Mexico, look for the peso to hold on to its current gains.
Union Bank of California
The Bank of Tokyo-Mitsubishi Group
http://www.uboc.com
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