Market Review – 06/08/2010 21:55 GMTDollar falls broadly against most currencies on disappointing U.S. jobs dataDollar tumbled against most of its counterparts on Friday as release of weak U.S. non-farm payrolls data added speculation that the Federal Reserve may need to take more stimulus measures at its next meeting on Tuesday to prevent the U.S. economy from going into a double-dip recession.
Although the greenback edged higher against the Japanese yen in Asia after Thursday’s weakness to 85.71, renewed selling at 86.19 in European morning capped intra-day rise. The pair then tanked to a fresh 8-month low of 85.02 after the release of weaker-than-expected U.S. non-farm payrolls and later staged a minor recovery in NY afternoon.
U.S. non-farm payrolls in July fell 131k, more than market forecast of minus 65k. The drop in payrolls showed the rise in private-sector employment was not enough to make up for the government jobs lost, however, the unemployment rate stayed unchanged at 9.5%. U.S. 2-year Treasury note yield dropped below 0.5% for the first time ever, suggesting market is getting more pessimistic on U.S. economy. Market is speculating the Fed may consider taking steps (quantitative easing) to support the fragile U.S. economy at next Tuesday’s FOMC meeting.
Earlier in Tokyo morning, the head of one of Japan’s business lobbies said that ‘the government should not intervene in the forex market despite a firmer yen, which weighs heavily on Japanese exporters’ profitability.’
Although the single currency traded sideways in Asia on Friday and retreated from 1.3204 to an intra-day low of 1.3157 after the release of weaker-than-expected German industrial production data which fell by 0.6% in June versus the economists’ forecast of 0.7% rise, the pair swiftly rallied above Tuesday’s high of 1.3262 after the release of weak U.S.jobs data. The single currency eventually hit a fresh 3-month high of 1.3334 and then retreated on profit-taking.
The British pound also traded narrowly in tandem with euro in Asia and ratcheted higher to 1.5920 in European morning, sterling fell sharply to an intra-day low of 1.5840 after the release of disappointing U.K. economic data. However, cable then rallied after release of U.S. non-farm payrolls and hit a fresh 6-month high of 1.5999 in NY morning after triggering stops above 1.5925 and then 1.5968, sterling later retreated on profit-taking and weekend long liquidation.
U.K. industrial production came in at -0.5% m/m and 1.3% y/y (forecasts were 0.2% m/m and 2.0% y/y) whilst U.K. manufacturing production rose by 0.3% m/m and 4.1% y/y, against the economists’ expectations of 0.3% m/m and 4.0% y/y.
U.S. and European equities fell on Friday due to weaker-than-expected U.S. non-farm payrolls. DJI once dropped by more than 150 points but later pared most of its intra-day losses and closed the day down by 21 points, or 0.2% at 10,654. FTSE-100, CAC-40 and DAX fell by 0.62%, 1.28% and 1.17% respectively.
In other news which came out in European morning, Standard & Poor’s Ratings Services said that it withdrew its ‘AAA’ long-term and ‘A-1+’ short-term issuer credit rating on Swiss National Bank, dollar swiss briefly rebounded to 1.0509 on this news but later fell to a near 8-month low of 1.0332 in New York morning after the U.S. jobs report.
Earlier in Asia, the Reserve Bank of Australia released its Quarterly Monetary Policy Statement and said it stuck to its forecasts for domestic growth to accelerate to 4% over the next two years, driven by a boom in trade and mining investment, but still expected underlying inflation to stay within its target. However, RBA gave little guidance on the outlook on interest rates and said only that it thought the current setting of monetary policy was appropriate at this stage.
Economic data to be released next week include:
U.K. RICS house prices, Japan Trade balance (jpy), Current account, Economic watch DI, Germany Trade balance (euro), Current account Jun, Export, Import on Monday, Australia NAB business confidence, Japan BOJ rate decision, Machine tools orders, Germany WPI, CPI final, Germany HICP final, U.K. BRC retail sales, Trade balance (gbp), DCLG house prices, Canada Housing starts, New housing price index, U.S. Labour cost, Productivity, Wholesale inventories, Fed rate decision on Tuesday, Japan Domestic CGPI, Machine orders, Australia W’pac consumer confi., U.K. N’wide Consumer Confi., Claimant count, ILO unemployment rate, BoE’s Quarterly Inflation, U.S. Trade balance (usd), Fed budget, Canada Trade balance (cad), Imports, Exports on Wednesday, Australia Employment change , Unemployment rate, Japan Capacity utilisation, Industrial prod’n, Consumer confidence, EU ECB Monthly Report, Industrial prod’n, U.S. Jobless claims, Export price index, Import price index on Thursday, Germany GDP, Swiss Combined PPI , EU GDP, U.S. CPI, CPI core M/M, Real earnings, Retail sales, Retail sales less auto, U.S. U. Michigan survey Prel., Business inventories on Friday.
