The euro saw fresh highs of $1.3870 versus the dollar late yesterday, remaining firm overnight, as it continues to be supported by talk of further action from the Fed. Comments from the Chicago Fed President that he favours “much more accommodation than we’ve put in place” have further fuelled talk that fresh quantitative easing measures could be introduced at the Fed’s next policy meeting in early November. Support versus the yen following yesterday’s announcement of easing measures from the Bank of Japan proved to be short lived, with the dollar back struggling to hold the Y83 level. Indeed, it is within easy reach of September’s 15 year low of Y82.87, with the impact of recent FX intervention by the Japanese authorities also failing to provide much support, demonstrating that, while effective for periods measured in days or weeks, interventions are rarely characterised as success when viewed over longer periods. The market is always bigger than one player.
Data on the service sector around the advanced economies helped robustify global confidence yesterday. In Europe, the UK service sector PMI rose to 52.8, from 51.3 - confounding expectations for a drop. The eurozone services PMI was also revised up, and in the afternoon the US non-manufacturing ISM also rose by more than expected in September. Accordingly, greater risk appetite saw the US dollar fall against major currencies. If it isn’t talk of further QE that weakens the dollar, it’s better global news giving incentive for investors to seek riskier assets. Either way, the Dollar seems to be on a one way course at the moment, and almost virtually everything occurring in financial markets currently can be attributed to the view that the Fed has a $1tn+ QE program waiting in the wings. The question thus, for market players to ponder is when will it appear? With the potentially pivotal US non-farm payroll report released on Friday, today’s ADP employment change survey is the first direct estimate of private sector hiring. While the ADP is volatile, it remains the best predictor for payrolls so will by crucial in changing market expectations. Recent data suggests that there is some upside to market estimates, however with the government continuing to shed jobs as census hiring unwinds, stronger private sector employment will be needed just to keep the unemployment rate from rising further.
Posted in Daily Market News on May 30 2014
As a summation of last week however, the US Dollar weakened against all of the major currencies on Friday, continuing the trend for the week. Despite US data being largely positive, dovish comments from the Fed have again provided the trigger for a bout of general USD weakness.VIEW FULL ARTICLE
Posted in Daily Market News on Oct 5 2010 by admin