The U.S. dollar extended gains against the yen as investors awaited reports on U.S. Employment and Factory Output. The greenback has been fragile ever since chairperson of the Federal Reserve, Janet Yellen, suggested that the next line-up of economic reports will provide guidance for the central bank to assess the right time to increase the interest rate. The U.S. dollar advanced versus several of the majors including the euro following the publication of the data. The ADP announced that the country’s Private Sector hired 191,000 workers last month, while economists predicted the sector would add 195,000 payrolls. Analysts commented that the release is not as reliable as the Non-Farm Payroll reports, but it nevertheless can still provide an indication on how the economy is faring. The U.S. dollar erased some of its gains versus the yen given that the numbers missed the forecast. U.S. Factory Orders rose 1.6 percent in February, surpassing estimates for a hike of 1.2 percent. Speculators took advantage of the declining price of Gold and as the precious metal dropped to a seven-week low, Chinese consumers bought more gold, prompting the metal to advance. Contracts for June delivery traded 0.3 percent higher at $1,284.00 a troy ounce on the Comex during european market hours.
The euro traded practically flat against the U.S. dollar and advanced versus the yen as market traders were reluctant to speculate on the outcome of today’s european Central Bank policy meeting. On the one hand, there’s been talk of a negative deposit rate recently, and on the other, some investors are speculating that the bank could boost the asset-purchasing program in the near future. The central bank’s President, Mario Draghi, delivered comments in an attempt to debase the euro, with no major effect. Officials say that the euro’s advance over the past 20 months contributed to the slowdown of consumer prices. The British Pound traded at a session high versus its U.S. counterpart after an announcement revealed that Construction increased rapidly, while the outlook for the U.K.’s economic improvement reached a seven-year high.
The yen slipped versus the U.S. dollar as investors awaited the announcement of key economic data out of the U.S, and it erased some losses due to metrics which revealed the addition of 191,000 jobs in March, rather than the 195,000 previously forecast. However, February’s report was modified to shows an increase of 178,000 payrolls rather than the previously announced 139,000. In Japan, the bigger companies worry that an increase in sales tax from 5 to 8 percent could curtail demand for big ticket items. But the government has reiterated that it will remain vigilant in order to ensure that the increase does not dampen the nation’s economic improvement.
Lastly, in the South Pacific, the Australian dollar fell versus the greenback on metrics indicating a decline in Building Approvals. And the New Zealand dollar slipped after reaching a 31-month high against its U.S. counterpart. This was mostly due to the fact that traders sold off the Kiwi in an effort to capture gains. The two currencies capped losses on the likelihood that China will step up efforts to fuel its economy.
EUR/USD: Spain On The Right Track
The EUR/USD slipped as the U.S. reported an increase for jobs in the private sector, and as the markets await the european Central Bank’s policy decision. The EUR/USD fluctuated slightly on Wednesday even though Spanish unemployment showed another drop, signaling that the country’s economy is gaining strength. The release came in days after Spain said that the Manufacturing PMI posted on target. Many investors believe that the european Central Bank will work towards improving the regional economic climate, as inflation has continued to decline. In the past week, the head of the Bundesbank, Jens Weidmann, stated that negative deposit rates would be the right measure to counteract the overvalued euro. He also intimated that the ECB could opt for further quantitative easing in the form of more asset purchases to curb deflationary pressures. Analysts predict the ECB will not sit idle but will implement some type of measure.
GBP/USD: Construction Picks Up
The GBP/USD rose after Markit Economics and the Chartered Institute of Purchasing and Supply of the U.K. indicated that the gauge which measures Construction inched to the downside from 62.6 to 62.5, denoting a mild slowdown. Other reports indicated higher demand and a positive business environment that has contributed to the highest level of optimism in several years. The announcement showed that construction improved at a rapid pace and recovered after bad weather conditions dampened growth. Industry reports confirmed that Home Prices rose for a 15th consecutive month in March.
USD/JPY: Companies Fear
The USD/JPY traded up and down, though the pair dipped on Wednesday after economic reports out of the U.S. showed a lower than anticipated number of jobs created in the private sector. The yen has remained under pressure as investors anticipate that the Bank of Japan may have to expand stimulus as a hike sales tax could have a negative effect on consumption and the economy as a whole. The USD/JPY reached a 10-week high earlier in the day as Asian stocks gathered momentum overnight, reducing demand for safe havens. The Japanese Nikkei rose 1.04 percent after the U.S. stock exchange showed gains which prompted the S&P Index to hit a record high at closing. The rallies were caused by speculation that the Chinese government is stepping up measures to improve the country’s economy.
AUD/USD: Data Disappoints
The AUD/USD fell on Wednesday as domestic news confirmed that Building Approvals dipped 5.0 percent in February, rather than the forecast 2.5 percent. On the positive side, January’s approvals were modified to show they increased 6.9 rather than 6.8 percent. But the AUD/USD continued to trade strongly on expectations the Chinese stimulus will increase demand of raw materials from the South Pacific nations. In the past few days, the Reserve Bank decided to leave the benchmark rate unchanged, just as predicted, while the bank’s governor, Glenn Stevens, reiterated that the currency is still overvalued.
Daily Outlook: Today’s economic calendar shows that the euro region will report on Services PMI and Retail Sales. Furthermore, the ECB is expected to issue the Interest Rate Decision and hold a Press Conference. The U.S. will release Initial and Continuing Jobless Claims, the Trade Balance and ISM Non-Manufacturing PMI.