Daily FX Market Outlook by AceTrader 6-1-2011

Market Review – 05/01/2011 21:53 GMT

Dollar surges due to robust U.S. economic data

The dollar rose sharply on Wednesday after a slew of upbeat U.S. economic data suggested the U.S. economy was on a steady path to recovery.

   
  
The greenback jumped across the board when U.S. ADP jobs report showed private payrolls increased 297,000 jobs last month, almost triple the median economist forecast, the number represented the most robust figure on record since the data started in 2000. The figure spooked many traders and they bought the dollar aggressively. The greenback rallied from 82.29 to 83.07 against the Japanese yen immediately after the number and U.S. Treasuries fell. The pair later climbed to an intra-day high of 83.38 following the release of stronger-than-expected ISM non-manufacturing index, which came in at 57.1 in December versus the forecast of 55.6.  
  
The single currency remained under pressure throughout Wednesday as bearish sentiment on euro zone debt concerns weighed on the pair. Euro edged lower from 1.3325 in Asia and then European traders sold euro ahead of the much-awaited 6-month Portuguese T-bill auction and renewed selling emerged after the yield jumped to 3.686% from 2.045% at last September’s auction (Portugal only had to pay 0.592% one year ago). The single currency eventually fell to 1.3125 in NY on dollar’s broad-base rally.  
  
Euro was also pressured as the Swiss National Bank had stopped accepting Irish government bonds as collateral in its money market.   
  
Volatile moves in cable were seen in London trading on Wednesday and despite staging a strong but brief bounce from 1.5537 to 1.5628 initially, renewed selling quickly knocked sterling lower. Price traded with a soft undertone after the release of weaker-than-expected Dec U.K. Construction PMI, actual 49.1 vs forecast of 50.9, the index dropped for the 1st time since Feb 2010, suggesting the U.K. economy remained weak and another reason was due to poor cold weather conditions which had negatively impacted on activity. Cable later nose-dived to 1.5451 in NY session on dollar’s broad-based rally after the release of a batch of upbeat US economic data.   
  
The market would pay attention to the release of U.S. non-farm payroll data due out on Friday. Analyst had revised the forecast upward following the strong ADP jobs data released on Wednesday.  
  
Economic indicators to be released on Thursday include:  
  
Swiss CPI, UK Service PMI, EU Business Climate, Economic Sentiment, Retail Sales, Germany Factory orders and US Jobless claims.

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