Daily Report: EUR/USD, GBP/USD, USD/JPY and USD/CHF

The U.S. Dollar traded mixed against the majority of its counterparts; however, it declined versus the Euro and the Yen after the markets settled down. On the data front, the U.S. Labor Department reported that initial unemployment claims dropped to 351,000, marking a four-year low which beat economists’ forecasts. Other news revealed that manufacturing in the Philadelphia area expanded a lot quicker than expected in March and climbed to the highest level in close to one year. In addition, manufacturing in the New York area increased to the highest level since 2010. Government figures also indicated that producer price inflation advanced by a seasonally adjusted 0.4 percent while core producer prices went up 0.2 percent. According to analysts, the overall data supports the belief that the U.S. economy has gained momentum, especially after the Federal Reserve increased its outlook. Positive data out of the U.S. also bolstered the value of the Canadian Dollar versus the greenback. The Loonie traded mixed against the U.S. currency for the remainder of the day as crude oil fluctuated and prices for April delivery dipped slightly to $105.39 on the New York Mercantile Exchange.

The Euro strengthened against the greenback despite better than anticipated data out of the U.S. However, the Pound slipped against eleven of its most traded counterparts after Fitch reduced its outlook for the U.K. to negative, citing extremely high debt levels and a sluggish recovery as the main reasons. The move was surprising as the British government implemented some of the most stringent measures since World War II in order to reduce spending. The Pound also dipped against the Euro after Fitch announced that the U.K. would lose its high investment rating. The Swiss Franc advanced against the Euro and the U.S. monetary unit following news that the country’s central bank raised the growth forecast for 2012.

And while market participants anticipated another decline for the Japanese Yen on the belief that the Bank of Japan would implement further easing, the currency rose from an 11-month low against the U.S. Dollar. According to investors, the Yen declined rather quickly in the past few days.

Lastly, the South Pacific currencies traded at a seven-week low versus the greenback in anticipation of the release of U.S. job figures. However, the Aussie Dollar rose versus the greenback after Asian stocks rallied. And New Zealand’s Dollar gained against all of the majors as manufacturing in the U.S. expanded, thereby fueling risk appetite in the markets. Furthermore, expansion of domestic manufacturing caused the Kiwi to advance against the Aussie Dollar.

EUR/USD- Euro Rises Despite U.S. Data

The Euro gained against the U.S. Dollar despite the release of better than expected employment and manufacturing figures out of the U.S. On the data front, the number of workers in the Euro region declined by 0.2 percent in the final part of 2011, while the numbers fell by 0.2 percent YoY. In addition, labor costs climbed to 2.8 percent. The Euro was also supported by news indicating that the IMF agreed to loan 28 bn Euros to Greece as part of the aid package. Risk appetite contributed to the strengthening of the Euro as sentiment was buoyed when President Barack Obama and Prime Minister David Cameron agreed to release more of their oil reserves. But the Euro’s gains were capped by reports showing that the European Central Bank revised its growth forecast for 2012 from -0.5 percent to 0.3 percent. Other releases confirmed that Italy’s government debt increased to 1935.8 bn.
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GBP/USD- Fitch Downgrades U.K. Rating

The British Pound weakened against most of its counterparts after Fitch announced it was downgrading the U.K.’s top investment rating from stable to negative, especially as reports revealed a large decline in industrial production and disappointing employment figures. The Pound fell as investors speculated the U.K. may lose its AAA rating given the latest warnings from Moody’s. Comments from the central bank’s board member Jim Broadbent also weighed on the Sterling. He suggested that world economic risks are putting pressure on the British economy and interest rates may have to be raised as global commodities are increasing in price. According to analysts, this added to speculations the BOE may implement further easing, though not until May.
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USD/JPY- Yen Rises From 11-Month Low

The Yen rallied after the U.S. currency consolidated gains. A weakening of the Yen caused the U.S. Dollar to reach an 11-month high especially after an increase in Treasury yields prompted investors to put their money in U.S. Dollar. But the rally is expected to be short-lived, as the country faces many challenges. For starters, the nation has lost the nuclear power industry and is now having to rely on expensive fossil fuels they import. Many analysts see global risk as the catalyst for a further increase in the value of the Yen, which is detrimental since the country relies heavily on exports. On the data front, reports showed that condominium sales rose 13.0 percent YoY in February.
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USD/CHF- Franc Rises From 7-Week Low

The Swiss Franc rallied from a seven-week low versus the U.S. Dollar after the Swiss National Bank forecast the economy will grow 1 percent in 2012. Meanwhile, policy makers pledged to maintain a cap of 1.20 Francs per Euro and to do what’s necessary to ensure the value of the currency remains low. The Swiss currency also advanced versus the Euro following a policy meeting during which the central bank increased the growth outlook for this year.
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Today’s Outlook

Today’s calendar shows that the E.U. will report on the Trade Balance. Canada will release data on the Foreign Securities Purchases and Manufacturing Sales. Lastly, the U.S. will announce CPI, Core CPI, Industrial Production and the Michigan Consumer Sentiment Index.