On Friday, the U.S. dollar weakened against the majority of its Forex counterparts following the publication of Non-Farm Payroll reports. Analysts say that on the surface, they appeared to denote that the U.S. economy is cooling off, but after digesting the news, many economists believe the numbers were not as bad as initially thought. While the release showed that employers added 113,000 payrolls, missing forecasts for a hike of 180,000, the news also confirmed that Household Employment climbed in January, and job creation benefitted individuals of prime working age. Furthermore, the fact that industries such as construction and manufacturing contributed to the creation of payrolls was taken as a sign that the weak employment level could just be temporary. However, all this did not stop investors from speculating on the Federal Reserve’s next move. Most market traders now believe the Fed may not taper stimulus as quickly as predicted. Gold Prices rose, given the possibility of a slowdown for the Fed tapering plans. Futures for delivery in April managed to rally to $1,272.00 an ounce on the New York Mercantile Exchange, and dipped to $1,262.90 at closing time on Friday.
The euro traded mixed, climbing the most since the end of January against the U.S. dollar following the release of lackluster Non-Farm Payroll numbers, and dipping as the German Court announced it would defer the ruling on the european Central Bank’s bond-purchasing plan to the european Court of Justice. The shared currency gained versus the yen even as demand for safe harbor currencies increased. The British Pound depreciated for a second week versus the greenback on metrics suggesting the Services and Manufacturing segments contracted in January, supporting a case for the Bank of England to maintain the key cash rate at the present lows. The Sterling lost the most in one week against the euro upon news that the central bank left the cost of borrowing money at 0.5 percent.
In Japan, the index of indicators confirmed that the nation sustained the most economic growth in five years. The yen slipped versus the U.S. dollar once the latter recovered subsequent to the publication of disappointing Jobs metrics. Today, Japan will report on the Current Account, Consumer Sentiment and Bank Lending.
Lastly, in the South Pacific, the Australian dollar received a boost following announcements by the Reserve Bank indicating a new position on monetary policy, though many speculators believe the currency is slated to weaken, given the lackluster economic fundamentals issued out of China recently, signaling that the South Pacific nation may face some challenges in the coming months. The New Zealand dollar advanced versus its U.S. peer and remained strong on the possibility that the Reserve Bank may raise the benchmark interest rate.
EUR/USD: German Court Won’t Intervene
The EUR/USD traded up and down; it dipped as the German Court stated that the european Central Bank abused its standing by pledging to engage in the unlimited buying of bonds from indebted nations. However, rather than rule on the matter, it decide to leave the decision to the european Court of Justice. The euro gained as the central bank’s President, Mario Draghi, said that policy makers aren’t worried about the low inflation numbers, even though the rate dipped to 0.7 percent. The EUR/USD gained as Mr. Draghi stated that the bank wouldn’t expand on stimulus at this time, and policy makers will wait until March to decide on whether to boost the key cash rate.
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GBP/USD: Metrics Reduce Chances For Rate Hike
The GBP/USD slipped for a second consecutive week on reports which supported speculation that the Bank of England may refrain from increasing the cost of borrowing money. Recent releases showed that Services, according to the survey of Purchasing Managers dipped from 58.8 to 58.3 in January, and the index which measures Factory Production slumped to 56.7 after coming in at 57.2 in December. For now, investors will wait for the central bank to publish its inflation report on the 12th of the month before making any further assessment on what the central bank will do. In the past week, the BOE indicated it will not make changes in policy, and left the key cash rate at 0.5 percent. Policy makers came under fire on Friday night on claims that they gave the green light for practices that have given rise to investigations of the London currency exchange. In the meantime, economists predict that consumer price inflation will post below the target 2 percent, a factor that’s keeping the pair from rising.
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USD/JPY: Fed May Take Less Aggressive Stance
The USD/JPY rebounded after a decline following dismal numbers for the U.S. Non-Farm Payroll releases of Friday. There’s a growing belief that the Federal Reserve will slow down tapering, especially since the economy signaled a cooling off for the creation of payrolls. Some economists predict that with Janet Yellen replacing Ben Bernanke as head of the Fed, the central bank may continue to act in a dovish fashion. In Japan, reports showed that the Index of Indicators created to reveal the welfare of the economy sustained a hike, as Japanese companies saw profits, hired more workers, and boosted production. The index came in at 111.7, denoting the fourth hike in a row.
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NZD/USD: Kiwi Climbs
The NZD/USD rose this past week as lackluster economic fundamentals out of the U.S. supported the Kiwi. The pair also benefitted by domestic data which revealed that dairy prices rose, bolstering Kiwi exports. Furthermore, the survey conducted by the New Zealand Manufacturers and Exporters Association which assesses business conditions, indicated that sales rose 2.02 percent in December, and on a YoY basis, exports surged 17.09 percent, but domestic sales plunged 14.0 percent due to worries over the situation in the emerging markets. The reports from the Employment sector were strong, denoting that the number of individuals who gained employment in the months of October to December rose by 24,000 after 28,000 found jobs in the third quarter of 2013. Lastly, the Rate of Unemployment went from 6.2 to 6.0 percent just as economists anticipated.
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Daily Outlook: Today’s economic calendar shows that Japan will report on Household Confidence and Current Account. Switzerland will publish the Unemployment Rate. Australia will release data on Home Loans, the House Price Index and NAB Business Confidence.