Daily FX Market Outlook by AceTrader-5-9-2011

Market Review – 03/09/2011 00:05 GMT

Dollar recovers after weak U.S. jobs data

Although dollar weakened broadly after release of worse-than-expected U.S. non-farm payrolls report as the gloomy data fuelled expectations of possible quantitative easing by the Federal Reserve at its next FOMC meeting later this month. The selloff in U.S. stocks triggered renewed risk-aversion activities and led to short-covering purchase of the greenback across the board in New York afternoon.

U.S. non-farm payrolls were much worse than market expectation as no new jobs were added vs street forecast of a 75k increase and July’s figure was revised sharply down from 117k to 85k. Private payrolls came in at 17k vs forecast of 105k whilst the unemployment rate remained unchanged at 9.1%.   
Versus the Japanese yen, the greenback edged lower from Asian higher at 76.97 to 76.75 in European session on cross buying of yen vs other currencies. Despite dollar’s recovery to 76.88, the pair quickly dipped to 76.53 in NY morning after the release of the dismal U.S. jobs data but then climbed back to 76.85 ahead of NY closing on short-covering.  
The single currency ratcheted lower from Asian high at 1.4287 to 1.4209 in European morning on cross-selling of euro (eur/jpy, eur/gbp and eur/chf tumbled from 109.87 to 108.85, from 0.8820 to 0.8748 and from 1.1354 to 1.1002 respectively) together with the selloff in European equities. Despite euro’s knee-jerk recovery to 1.4288 after release of the U.S. jobs data, renewed selling sent the pair lower to session low of 1.4183 in NY afternoon due to the sharp fall of U.S. stock markets.   
The British pound edged higher from Thursday NY low of 1.6132 on active cross buying of sterling vs euro and rose to 1.6255 after the release of U.S. jobs data. Despite a brief but strong retreat to 1.6172, cross-buying of sterling vs euro lifted the pair again to 1.6228 in NY afternoon.  
Earlier in European morning, cable was pressured after the release of U.K. Aug construction PMI which came in at 52.6 (forecast was 52.6) versus previous reading of 53.5 in July. The data suggested British construction activity expanded at its weakest pace since December, 2010 due to a slowdown in orders and output growth, as well as a more negative outlook.  
The DJI tumbled by 253.31 points or 2.20% and closed at 11240.26 whilst major European bourses ended the day in the red with the FTSE-100, CAC-40, and DAX indices falling by 2.34%, 3.59% and 3.36% respectively.  
Data to be released next week include:  
U.K. Lloyds employment confidence, services PMI, Germany services PMI, EU services PMI, sentix investor confidence, retail sales on Monday (U.S. and Canada are closed for Labor Day market holiday).  
U.K. BRC retail sales, Australia current account, RBA rate decision, Swiss CPI, EU GDP, Germany factory orders, U.S. ISM non-manufacturing on Tuesday.  
Australia GDP, Japan BoJ rate decision, leading indicators, U.K. industrial production, manufacturing production, Canada BoC rate decision, Ivey PMI on Wednesday.  
Japan current account, machinery orders, economic watch DI, Australia unemployment rate, trade balance, Swiss unemployment rate, Germany trade balance, export, imports, U.K. BoE rate decision, EU ECB rate decision, U.S. jobless claims, Canada building permits, new housing price index, trade balance, exports, imports on Thursday.  
Japan GDP, consumer confidence, Germany CPI final, HICP final, U.K. PPI input, PPI output, PPI core, Canada unemployment rate, housing starts, U.S. wholesales inventories on Friday.