Dollar rebounds on short covering ahead of Friday's key U.S. jobs data

Market Review - 31/01/2019  23:48GMT  

Dollar rebounds on short covering ahead of Friday's key U.S. jobs data

Although the greenback continued its losing streak and hit 3-week lows against its peers after Wednesday's dovish Federal Reserve policy statement, intra-day weakness in eur/usd triggered a bout of usd's short covering in New York afternoon session ahead of release of key U.S. jobs report on Friday.   
  
The number of people who filed for unemployment assistance in the U.S. posted its sharpest rise in a year last week, due to the federal government shutdown earlier in the month.  
  
The U.S. Department of Labor said Thursday that the number of individuals applying for initial jobless benefits in the seven days ended Jan. 25 increased by 53,000 to a seasonally adjusted 253,000. Analysts expected jobless claims to rise by 17,000 to 215,000 last week from the previous week's total of 200,000, which was revised from 199,000  
  
Versus the Japanese yen, dollar met renewed selling at 109.07 in Australia and retreated 108.84 at Asian open and continued to ratchet lower in Asia and Europe on usd's broad-based weakness. Price eventually hit session lows of 108.50 in New York morning on poor U.S. jobsless claims before staging a short-covering rebound to 108.94 in New York afternoon.  
  
Although the single currency traded with firm bias in Asia and extended its recent winning streak and briefly rose above Wednesday's high at 1.1502 to 1.1515 (Reuters) at European open, price erased its intra-day gains and dropped to 1.1471 in European morning before stabilising. However, despite a rebound to 1.1497 in New Yrk morning, downbeat comments by ECB Governing Council member Jens Weidmann knocked price to session lows of 1.1435 (Reuters).  
  
Reuters reported Germany's economic slump will be deeper and longer than earlier thought, and the euro zone is likely to undershoot its 2019 inflation projection, Bundesbank President Jens Weidmann said on Thursday in an unusually gloomy outlook.  
  
Germany has been the engine of the euro zone's recovery but growth has unexpectedly stalled. A protracted slump could spread weakness across the currency bloc and may force the European Central Bank to give up on plans to dial back stimulus.  
  
The bleak prognostication from Weidmann also comes as some investors have criticised the ECB for admitting too late that growth is stalling and its December forecasts are no longer realistic.  
  
The British pound also traded with a firm bias in Asia and briefly rose to session highs at 1.3157 at European open, however, erased its gains and dropped to 1.3098 in New York morning before staging a strong rebound in New York to 1.3160 due partly to cross-buying of sterling especially vs euro. However, intra-day decline in eur/usd later knocked price to 1.30698.  
  
In other news, Reuters then reported British Prime Minister Theresa May will meet the group of lawmakers behind an alternative Brexit proposal later on Thursday, her spokesman said.  
  
In addition to May's meeting with those behind the so-called 'Malthouse Compromise' plan (Full Story), officials will meet trade union representatives, the spokesman said, adding the government wanted to secure changes to the Brexit deal with the European Union as soon as possible.  
  
The government remained determined to have everything in place to leave the EU on March 29, he said.  
  
On the data front, in a report, Eurostat said that GDP rose a seasonally adjusted 0.2% in the October to December period, matching the prior reading and in line with the consensus forecast. Year-on-year, GDP in the single currency bloc slowed to 1.2% in the fourth quarter, compared to the 1.6% expansion seen in the previous quarter. Economists had expected growth of 1.2%.  
  
Data to be released on Friday:  
  
Australia AIG manufacturing index, PPI, Japan unemployment rate, China Caixin manufacturing PMI, Swiss consumer confidence, retail sales, CPI, manufacturing PMI, France budget balance, Markit manufacturing PMI, Italy Markit manufacturing PMI, Germany Markit manufacturing PMI, EU Markit manufacturing PMI, HICP, UK Markit manufacturing PMI, Canada Markit manufacturing PMI, and U.S. non-farm payrolls, private payrolls, unemployment rate, average earnings, Markit manufacturing PMI, ISM manufacturing PMI, University of Michigan sentiment.