Daily Forex Analysis by Finexo.com 05/02/2010

Past events
· EUR Minimum Bid Rate out at 1.0%, versus expected 1.0%, prior 1.0%
· GBP Official Bank rate out at 0.5%, versus expected 0.5%, prior 0.5%
· GBP Asset Purchase facility out at 200B, versus expected 200B, prior 200B
· GBP PPI Input m/m out at 2.0% versus expected 0.7% , prior 0.6%
· CAD Ivey PMI out at 50.8 versus expected 52.3, prior 48.4
· USD Non-Farm Employment Change (1530GMT)
· USD Unemployment Rate (1530GMT)
· CAD Employment Change (1200GMT)
· CAD Unemployment Rate (1200GMT)

Market Comments

To no surprise both the European Central Bank and Bank of England left their benchmark interests unchanged at their current historically low levels.
For the ninth month in a row, the ECB left its interest unchanged at 1.0%. Jean Claude-Trichet, president of the ECB, announced yesterday that while the Eurozone economy continued to expand at the start of the year, the recovery would be “uneven” and “moderate.” Trichet also said it was “absolutely crucial” the Greek government gets a grip on its public finances as he gave his cautious support to its plan to get Greece’s budget deficit down.

Following news of the ECB’s decision, the Euro plunged to a new eight month low against the US Dollar, trading well below the key $1.38 level. In its very volatile trading session, the EUR managed to fall as much as 0.5% against its US counterpart, striking as low as $1.3669. However, early this morning, the single European currency managed to erase some of its tremendous losses, stabilizing at $1.3725.

Across the Channel, the Bank of England, as expected, also left its interest rates unchanged, at its current record low level 0.5%, as well announcing that it would leave its Asset Purchase target unchanged. While the BoE, decision to maintain its key interest rate at 0.5% in order to meet the 2.0% inflation target in the midi-term, as well as to keep its bank assets purchasing program at GBP 200 billion was considered appropriate- the GBP continued to fall against the USD. The Pound experienced more traumatic losses against its American counterpart, hitting as low at $1.5759.
Later today, the US will announce its highly anticipated Change in Non-Farm Payroll. For the first time in a long time, analysts are predicting that this number will be positive with an increase in 10K workers last month- a drastic change from the fall of 85,000 in December of 2009.

While yesterday’s weekly Employment Claims came worse than expected in with disappointing 480K- the ADP Non-Farm Payroll was better than predicted. Generally considered as a forecasting index for today’s highly anticipated Non-Farm Payroll report, the ADP figure came out much better than expecting, sending the dollar in an upwards swing against its major counterparts-specifically the EUR and the GBP.

Following the release of the NFP, the US will release its unemployment rate predicted to remain at its current dismal level of 10%.

The release of this highly anticipated news from the US will overshadow news from its neighboring country, Canada. Published today at 12:00 GMT, 90 minutes before the American NFP, Canada will release its employment change for the past month as well as its current unemployment rate.
While last month we saw a disappointing drop of 2,600 jobs, Canada’s job market is improving gradually- today’s report is predicting a rise of 15.2K job. The Unemployment Rate figure has been more stable, easing from 8.6% to 8.5% two months ago, and remaining stable last month. It seems that the situation is stabilizing with the Unemployment Rate expected to remain unchanged at its current level of 8.5%.

Last week, the market closed with the CAD relinquishing some of its prior gained ground to the USD- today, both the US and Canada will release two fundamental reports that could shape this week’s close of their respective currency. If Canada’s unemployment level comes in better than expected, and the US’s NFP does not meet its high expectations, we could very well see a reversal effect of last week’s closing.

Written by Finexo.com