Daily FX Market Outlook by AceTrader 4-4-2011

Market Review – 01/04/2011 20:16 GMT

Dollar falls broadly after dovish comments from the New York Fed President

The greenback fell across the board in New York midday after Federal Reserve Bank of New York President William Dudley said in a speech in Pueto Rico that firming of economic activity is welcome and not a reason to reverse course. He also added that the Fed is still very far away from achieving its dual mandate of maximum sustainable employment and price stability.

Earlier, the dollar rallied against the Japanese yen following the much better-than-expected U.S. jobs report and price eventually extended recent ascent from record low of 76.25 to as high as 84.74 in New York morning before retreating on Dudley’s remarks.   
U.S. non-farm payrolls increased by 216,000 in March versus street forecast of 190,000, private payrolls posted 230,000 gain versus forecast of 200,000 and unemployment rate fell slightly to 8.8% from last month’s reading of 8.9%. The unemployment rate has come down to its lowest level in 2 years.  
The euro rallied in New York trading and went through another roller-coaster session. The single currency tanked from European high of 1.4180 to an intra-day low of 1.4061 after the stronger-than-expected U.S. jobs data and later rallied back above 1.4200 level to a day’s high of 1.4246 on active short-covering as Dudley’s dovish comments clouded the Fed’s rate hike prospect, which was in sharp contrast to ECB’s certain rate hike next week. Cross-buying in euro also supported the single currency as eur/jpy and eur/chf rallied sharply from 117.74 to 119.80 and from 1.3012 to 1.3171 respectively.  
Similar to the euro, the British pound also went through an extremely volatile session. Although cable ratcheted lower from European high of 1.6083 and tumbled to 1.5972 in New York morning, cable later rallied to as high as 1.6134 in tandem with euro before trading sideways. Earlier, a lower-than-expected U.K manufacturing PMI data also pressured sterling. U.K. March manufacturing PMI fell sharply to a five-month low of 57.1, much weaker than economists’ forecast of 60.6 and the downwardly revised reading of 60.9 in February. However, firms still ramped up prices at a record rate to cover rising costs. Markit said the slowdown in demand was most pronounced in the consumer goods sector, which was virtually stagnant and indicated a fall in domestic orders for such goods.   
The Australian dollar posted another fresh 29-year high of 1.0398, New Zealand dollar rose strongly from 0.7581 to 0.7683 while usd/cad pair tumbled to a 3-year low of 0.9626.  
Data to be released next week include:  
EU Sentix investor confidence; U.K. construction PMI; EU PPI on Monday.  
Australia trade balance and RBA rate decision; Germany services PMI; EU services PMI and retail sales ; U.K. service PMI; U.S. ISM non-manufacturing and FOMC meeting minutes on Tuesday.  
U.K. BRC shop price index, industrial production and manufacturing production; Japan leading indicators; Swiss CPI; EU GDP; Germany factory orders; U.S. Midwest manufacturing; Canada Ivey PMI on Wednesday.  
Australia Employment change; Japan BOJ rate decision; German industrial production; U.K. BOE rate decision and BOE asset purchase target; Canada building permits; U.S. jobless claims on Thursday.  
Japan current account and economic watch DI; German export and import; U.K. core, input and output PPI; Canada employment change, unemployment rate and housing starts; U.S. wholesale inventories on Friday.