The currency market was very quiet in April with the major pairs trading sideways. Despite the continued Federal Reserve QE3 tapering, the US dollar failed to strengthen significantly. The US GDP growth slowed from 2.6% in Q4 2013 to 0.1% in Q1. The government explains this slowdown by citing unfavorable weather conditions. The April labor market report blew out all the expectations: nonfarm payrolls rose by 228K, while unemployment rate fell from 6.7% to 6.3%. The market was not really impressed, however: the main reason why the unemployment rate declined was the drop in labor force participation rate. The market expects the fund rate to be hiked only in the mid-2015 – the largest economy in the world still needs monetary support from the government.
Geopolitical tensions in Ukraine remain the topic of concern – the conflict has gone further over the past month and there is no de-escalation seen on the horizon. Chinese economy also attracts market attention: GDP slowed to 7.4% in Q1. China’s “soft landing” threatens the demand for commodities and the wellbeing of the countries exporting them. All these factors are weighing on the risk appetite and support the safe assets such as the Japanese yen, Swiss franc and gold.
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