Market sentiment remained broadly positive on Thursday as the US dollar bounced off yesterday’s lows and oil reversed a sharp slide to end the day higher. The dominating data in today’s Asian session were the services PMI for China and Japan. Services activity slowed in both China and Japan in February according to the latest PMI readings. Market reaction was muted though as traders were more focused on signs of a rebound in commodity prices.
Oil prices posted a late rally on Wednesday after initially dipping from data showing US crude oil inventories surged in the week ending February 26. However, investors chose to ignore the data as markets became more optimistic that prices had bottomed out. US crude oil futures hit a low of $33.55 a barrel before reversing sharply to rally to $35.11. They were last trading at $34.58 in late Asian session today.
Other commodities such as copper and iron ore also made gains, extending their rally since mid-January. This boosted the Australian dollar, which jumped above the 0.73 level against the US dollar to a 2-month high. The aussie already got a lift yesterday from better-than-expected Australian GDP data. There was further support for the currency today from stronger-than-expected trade figures. The aussie was last up at 0.7310 versus the greenback.
Meanwhile, the US dollar recovered from yesterday’s lows when it fell to 113.21 yen despite robust jobs figures from the ADP employment report. The greenback has since rebounded as traders shift their attention to Friday’s nonfarm payrolls report, which is also expected to be positive. The dollar was last testing the 114 handle in late Asian session.
The euro and the pound also moved higher, climbing to 1.0865 and 1.4075 dollars respectively. ECB Executive Board member Benoit Coeure yesterday raised expectations of further cuts in the deposit rate into negative territory after he said that Eurozone banks can deal with ultra-low interest rates.
Coming up later today, services PMI for the UK and Eurozone retail sales figures will be watched, while in the US, ISM non-manufacturing composite and the initial weekly jobless claims will come into focus.