The U.S. Dollar surged on Friday subsequent to what many market traders called a stellar Non-Farm Payrolls report, as the release denoted that 288,000 new payrolls were created. However, not all of the releases were positive. Despite a drop in Unemployment to 6.3 percent, the average salary declined in April, dampening forecasts for the Inflation outlook. This past week, the Federal Reserve indicated that it will continue reducing stimulus and will cut the bond purchases to $45 billion per month. The FOMC stated that it will leave the key cash rate at the current low for some time to come, though a number of analysts are predicting that this may not be the case given signs of economic recovery. The greenback was weighed down by news out of the Ukraine that violence is escalating between the factions. Reports showed that pro-Russian separatists released some hostages, a move that only eased tensions slightly. But as the crisis between Moscow and Kiev intensified, Gold Prices climbed. The Ukrainian government ordered military forces to recapture Slovyansk, in defiance of President Vladimir Putin’s warnings. The shiny metal fell 0.7 percent upon the release of Non-Farm Payrolls, but rebounded 1.5 percent to $1,302.90 a troy ounce on the Comex. The crisis appeared to worsen after the U.S. warned Russia that it could impose fresh sanctions should it interrupt Ukrainian elections scheduled for May 25th.
The Euro traded up and down but strengthened versus the U.S. Dollar as recent Inflation data boosted speculation that the European Central Bank may not implement any new monetary easing measures for now. In the Euro region, the rate of Unemployment did not rise as predicted, but remained at the current 11.8 percent in March. The British Pound sustained a remarkable surge versus the greenback as the economic releases issued in the past days denoted that the economy continues to improve, and as Real Estate prices have kept going up at the fastest pace in seven years. The Swiss Franc rallied against its U.S. counterpart after falling on stellar U.S. employment data which confirmed that Unemployment touched a five-year low. However, the Swiss Franc was supported by a hike in risk aversion brought on by the crisis in the Ukraine.
The Yen rose against the U.S. Dollar and remained within a tight range against the Euro while Japan’s government discussed a new plan for spurring economic growth while considering the possibility of slashing corporate taxes from 35 to 20 percent.
Lastly, in the South Pacific, Australia’s Dollar touched a five-week low versus the greenback before rising on news that the U.S. increased payrolls in April but posted lower rates for average salaries and job participation.
EUR/USD- Speculators Wonder About ECB
The EUR/USD gained on Friday even as the U.S. issued a robust Non-Farm Payroll report. Meanwhile, the Euro region announced that its Unemployment rate did not spike as expected. According to the latest news, the rate stayed at 11.8 percent in March, coming in just lower than a predicted jump of 11.9 percent. With violence in the Eastern region of Ukraine, investors sought alternate investments, causing the greenback’s drop. The EUR/USD remained supported despite news out of Germany indicating that the Manufacturing PMI fell from 54.2 to 54.1, and Spain’s slipped to 52.7 from 52.8. For now, speculators continue to wonder what the European Central Bank may do next, while some economists predict that the monetary authorities will not push to increase stimulus, given the fact that consumer prices ticked up from 0.5 to 0.7 percent.
GBP/USD - Real Prices Worry Officials
The GBP/USD rallied to more than a four year high as metrics indicated that the U.K.’s economy expanded in the first quarter of 2014, and as House Prices climbed at the fastest rate since 2007. However, while the prices bolstered confidence over economic improvement, the quick rise has given officials reason to worry. Economists believe that the hike in real estate prices could signal the beginning of a bubble. Friday’s releases indicated that the U.K.’s Construction sector slowed down. The Purchasing Manager’s Index posted a drop from 62.5 to 60.8.
EUR/JPY - Corporate Taxes Could Go Down
The EUR/JPY traded in a tight range as speculators listened closely to statements released by Mario Draghi, the President of the European Central Bank, in an effort to gauge how the bank will proceed in regards to further easing. Meanwhile, the Japanese government is currently discussing the second stage of its economic plan, which will focus on providing many more tax breaks, as well as looser constraints on investment rules for start-up businesses. The Yomuri newspaper also revealed that the government is contemplating lowering corporate taxes from 35 to 20 percent in order to encourage capital expansion, something that’s needed in the country. Prime Minister Shinzo Abe is slated to announce the release of the second part of the plan some time in the coming month, while perhaps regaining the confidence of those disappointed with the initial results of his strategy.
NZD/USD - Tepid Data Weighs On Kiwi
The NZD/USD rallied on Friday after the U.S. issued its monthly Non-Farm Payroll Reports, indicating a decline in the Unemployment rate, and the creation of more jobs than forecast for April, but a dip in job participation. Meanwhile, in the South Pacific nation, the Manufacturers and Exporters Association survey based on business conditions showed that total sales climbed 12.57 percent in March. The reports also indicated that exports rose 29.33 percent on a year-over-year basis. The NZD/USD remained strong despite lackluster data out of China showing that the Manufacturing sector did not improve. The index posted at 50.3 denoting no major change.
Today’s Outlook
Today’s economic calendar shows that the markets in Japan and the U.K. are closed for a holiday. The Euro region will report on the Sentix Investor Confidence and PPI. The U.S. will release the ISM Non-Manufacturing PMI and ISM Non-Manufacturing New Orders. Australia will publish the Trade Balance.