Currency Market News
For the first time in many months, the US dollar benefited from positive U.S. data Friday against both the euro and yen. U.S. job losses softened markedly last month in one of the strongest signals yet that the severe recession may be winding down with Non Farm Payrolls sliding to -345,000 in May, the U.S. Labor Department reported, well below the -525,000 decline economists had expected.Initially, the euro spiked against the dollar to a session high, as traders bought into riskier positions on the promising economic data. However, the euro then suffered from a sharp reversal as the currency markets considered the data in more detail and in particular that the strong figures could mean the U.S. fed funds rate may be back on its way up. Low rates and other monetary easing measures in the U.S. have undercut investor appetite for US dollars in the last few months in favor of the euro and commodity related currencies. The stronger than expected NFP data sent the front end of the Treasury market higher, suggesting investors are beginning to think about an increase in the fed funds rate after more than a year of aggressive monetary easing by U.S. policy makers.
The euro fell to a one week low of 1.4013, after rising as high as 1.4269 immediately after the report. Friday morning in New York, the euro was at 1.4043 from 1.4182 late Thursday, with the US dollar at 97.96 against the Japanese yen from 96.80 earlier. The euro was at 137.58, up from 137.24 also against the yen, and the U.K. pound stood at 1.6033 from 1.6186 earlier in the session. The dollar was at CHF1.0820 from CHF1.0700 Thursday.
Currency Markets Outlook
The euro vs yen base has been eroded and stops below duly triggered as the cross pair loses another 50 points down to current levels. Support is noted at 135.60/30, though orders still said to be few and far between as many currency traders take a back seat after recent volatility. The UK Pound has broken below 1.6000 at the second attempt, the first challenge meeting a regular bid at this level that soaked up several hits before the bounce took it back to the 1.6030 area. The rate fell as low as 1.5984, with earlier reports noting demand placed to USD1.5980. A break here may open a deeper move to USD1.5950 ahead of USD1.5920 and the near term technical target area around USD1.5885/80. Resistance remains in place at USD1.6030.
Looking further ahead for the euro, many traders are worrying that the ECB forecasts for the next 12 months are based on the assumption that the euro will be trading at USD1.33 in 2009 and USD1.34 in 2010. Meanwhile, ongoing fears over Latvia’s economy continue to pressure local emerging market currencies and the Swedish krona.
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