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Market Review - 05/06/2009 20:03 All times in GMT
Dollar rallies broadly on strong jobs report
The greenback rose against a basket of currencies after the release of better-than-expected U.S. non-farm payrolls data, suggesting that the U.S. economy would come out of the global crises first. In addition, hawkish comments from Atlanta Federal Reserve President Dennis Lockhart added support to the dollar's broad-based rally in New York trading. The ICE dollar index jumped 1.2% which is the largest one-day gain in more than five months.
During Asian and European sessions, euro traded sideways against the dollar as traders were sidelined ahead of the release of the key U.S. jobs data. The single currency jumped initially to an intra-day high of 1.4269 after U.S. unemployment rate in May which came out at 9.4%, which was much higher than the previous reading of 8.9% in April. However, euro then tumbled on dollar's broad-based strength as traders reacted to the much better-than-expected non-farm payrolls data (figure showed a sharp decrease of 345,000 versus forecast of 517,000). Furthermore, Atlanta Federal Reserve President Dennis Lockhart said that the Fed needs to be “anticipatory” and not wait too long to tighten monetary policy and the Fed could raise interest rates while maintaining the quantitative easing policy.
The British pound also traded relatively narrowly against the dollar in London morning session. Sterling then rebounded briefly and sharply to as high as 1.6245 against the dollar after the release of U.S. unemployment rate which had climbed to its the highest in nearly 26 years. However, investors focused on the much smaller-than-expected U.S. job cuts as a slower deterioration of the labor market, this improved number supported bets that dollar-denominated assets will gain while the U.S. economy is recovering. Cable later tumbled to an intra-day low of 1.5940 against the greenback in New York afternoon session. In addition, although the British Prime Minister Gordon Brown re-arranged his cabinet and rebuffed calls for his resignation, this political uncertainty continued to pressure the pound against the greenback.
Janet Yellen, President of the San Francisco Fed, said the recent sharp rise in U.S. Treasury yields would be 'disconcerting' if it is driven by worries that the Federal Reserve will not be able to prevent a jump in inflation. Yellen warned that more volatility could lie ahead of U.S. and global economies now that a long period of relative stability, often termed the 'Great Moderation', seemed to have passed.
Next Monday will be a holiday in Australia. Data to be released in the coming week include Japan current account, economic watch, Switzerland unemployment rate, German factory orders, Canada housing starts on Monday, Japan leading indicators, German current account, trade balance, U.K. BRC retail sales, RICS and DCLG house price, German industrial production, U.S. wholesale inventories on Tuesday, Japan CGPI, Australia Westpac consumer confidence, German CPI and HICP, U.K trade balance, industrial and manufacturing production, U.S trade balance, Fed budget on Wednesday, New Zealand RBNZ rate decision, Japan GDP, Australia unemployment, German WPI, Canada capacity utilisation, U.S jobless claims, retail sales data on Thursday, Japan capacity utilization, industrial production, consumer confidence, eurozone industrial production, U.S import and export price, and University of Michigan survey on Friday.
Dollar rallies broadly on strong jobs report
The greenback rose against a basket of currencies after the release of better-than-expected U.S. non-farm payrolls data, suggesting that the U.S. economy would come out of the global crises first. In addition, hawkish comments from Atlanta Federal Reserve President Dennis Lockhart added support to the dollar's broad-based rally in New York trading. The ICE dollar index jumped 1.2% which is the largest one-day gain in more than five months.
During Asian and European sessions, euro traded sideways against the dollar as traders were sidelined ahead of the release of the key U.S. jobs data. The single currency jumped initially to an intra-day high of 1.4269 after U.S. unemployment rate in May which came out at 9.4%, which was much higher than the previous reading of 8.9% in April. However, euro then tumbled on dollar's broad-based strength as traders reacted to the much better-than-expected non-farm payrolls data (figure showed a sharp decrease of 345,000 versus forecast of 517,000). Furthermore, Atlanta Federal Reserve President Dennis Lockhart said that the Fed needs to be “anticipatory” and not wait too long to tighten monetary policy and the Fed could raise interest rates while maintaining the quantitative easing policy.
The British pound also traded relatively narrowly against the dollar in London morning session. Sterling then rebounded briefly and sharply to as high as 1.6245 against the dollar after the release of U.S. unemployment rate which had climbed to its the highest in nearly 26 years. However, investors focused on the much smaller-than-expected U.S. job cuts as a slower deterioration of the labor market, this improved number supported bets that dollar-denominated assets will gain while the U.S. economy is recovering. Cable later tumbled to an intra-day low of 1.5940 against the greenback in New York afternoon session. In addition, although the British Prime Minister Gordon Brown re-arranged his cabinet and rebuffed calls for his resignation, this political uncertainty continued to pressure the pound against the greenback.
Janet Yellen, President of the San Francisco Fed, said the recent sharp rise in U.S. Treasury yields would be 'disconcerting' if it is driven by worries that the Federal Reserve will not be able to prevent a jump in inflation. Yellen warned that more volatility could lie ahead of U.S. and global economies now that a long period of relative stability, often termed the 'Great Moderation', seemed to have passed.
Next Monday will be a holiday in Australia. Data to be released in the coming week include Japan current account, economic watch, Switzerland unemployment rate, German factory orders, Canada housing starts on Monday, Japan leading indicators, German current account, trade balance, U.K. BRC retail sales, RICS and DCLG house price, German industrial production, U.S. wholesale inventories on Tuesday, Japan CGPI, Australia Westpac consumer confidence, German CPI and HICP, U.K trade balance, industrial and manufacturing production, U.S trade balance, Fed budget on Wednesday, New Zealand RBNZ rate decision, Japan GDP, Australia unemployment, German WPI, Canada capacity utilisation, U.S jobless claims, retail sales data on Thursday, Japan capacity utilization, industrial production, consumer confidence, eurozone industrial production, U.S import and export price, and University of Michigan survey on Friday.
