Daily FX Market Review-6-9-2010

Market Review – 03/09/2010 21:50 GMTDollar falls broadly as better-than-expected U.S. jobs data boosts risk appetite

The greenback dropped against most major currencies on Friday as better-than-expected U.S. non-farm payrolls eased recent worries on U.S. economic recovery and boosted demand for risky assets and higher-yielding currencies such as the Australian dollar.   
  
Although the greenback traded narrowly against the Japanese yen in Asia and European morning, the pair jumped to 85.23 immediately after release of better-than-expected key U.S. jobs data. However, dollar retreated from there on profit-taking together with cross buying in yen versus other European currencies and later fell sharply to 84.23 after the release of much weaker-than-expected U.S. ISM manufacturing and then traded narrowly in NY afternoon.  
  
U.S non-farm payrolls in August showed a drop of 54K jobs versus the forecast of -100K. However, private sector posted a surprise increase of 67K versus the forecast of +41K, suggesting employers were beginning to hire more people even during the summer month, allaying recent market concern that the world’s largest economy may be moving back into recession and boosted appetite for risky assets such as commodity currencies i.e Australian dollar, New Zealand dollar and Canadian dollar .  
  
U.S. ISM manufacturing PMI data came in at 51.5, versus the economists’ forecast of 53.5 and the previous reading of 54.3 in July.  
  
Earlier in Tokyo trading, Ichiro Ozawa, who is challenging Japanese Prime Minister Naoto Kan in DPJ’s presidential election, said on a TV Asahi program that intervention in currency markets to stem the yen’s appreciation was a possibility. He also added Japan could also use the strong yen to secure resources globally.   
  
The single currency moved narrowly in Asia and price rebounded from 1.2808 to 1.2854 in Europe on slightly stronger-than-expected eurozone services PMI, which came in at 55.9 versus the expectations of 55.6. Later, despite euro’s brief drop to 1.2814 after the release of U.S. jobs data, buying interest quickly emerged and euro rose to an intra-day high of 1.2898 in NY afternoon due to rally in U.S. stocks together with active cross buying in euro.   
  
On data front, eurozone retail sales rose by 0.1% m/m and 1.1% y/y, versus the expectations of 0.2% and 0.6% respectively.   
  
The British pound edged higher in Asia after Thursday’s selloff to 1.5350 and climbed to 1.5452 in London morning. Despite intra-day brief but sharp fall to 1.5392 after the release of much weaker-than-expected U.K. Services PMI (U.K. CIPS services PMI came in at 51.3, much weaker than economists’ forecast of 52.9), sterling rebounded strongly in tandem with eur/usd shortly after the U.S. jobs data and rose to as high as 1.5469 ahead of NY closing.  
  
The commodity currencies rose strongly on Friday, as the Australian dollar and the New Zealand dollar rallied from 0.9066 to 0.9176 and 0.7132 to 0.7220. Usd/cad tumbled from 1.0569 to 1.0381.  
  
In the global equity market, DJI rallied on Friday and closed the day at 10448, up by 128 points or 1.24%. FTSE-100, CAC-40 and DAX surged by 1.14%, 1.06% and 1.12% respectively. U.S. markets will be closed for the Labor Day holiday.  
  
Economic data to be released next week include:   
  
Japan BoJ 2-day meeting (U.S. and Canada are closed for holiday) on Monday, U.K. BRC retail sales, Australia RBA rate decision, Japan Leading indicators, BOJ rate decision, Swiss Jobless rate, Germany Factory orders on Tuesday, Japan Trade balance (jpy), Current account, Machine orders, Economic watch DI, Germany Trade balance (euro), Export, Import, Industrial prod’n, U.K. BRC shop price index, Industrial prod’n , Manufacturing prod’n, Canada Building permits, BOC rate decision, Ivey PMI, U.S. Fed’s Beige Book on Wednesday, Australia Employment change , Unemployment rate, Japan Consumer confidence, Germany CPI final, HICP final, U.K. Trade balance (gbp), BOE rate decision, BOE Asset Purchase Target, U.S. Trade balance (usd), Jobless claims, Canada Housing starts, Trade balance (cad), Exports, Imports, New housing price index on Thursday, Japan Domestic CGPI, GDP Rev. , U.K. PPI core, PPI input, PPI output, Canada Unemployment rate, Jobs-change, U.S. Wholesale inventories on Friday.

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