The U.S. dollar plunged dramatically after the Labor Department published the much anticipated Non-Farm Payroll reports, originally scheduled to be released on October 4, but postponed due to the recent government shutdown. Information issued on Tuesday confirmed that employers in the U.S. hired fewer workers than estimated. The greenback spiraled to the downside, hitting close to a two-year low against the euro as the release confirmed that only 148,000 employees joined the work force in September, while analysts had forecast that 180,000 payrolls would be added. In comparison, 193,000 jobs were added in August. The release also confirmed that Unemployment went from 7.3 to 7.2 percent, which was the lowest rate since November of 2008. The Federal Reserve is expected to announce its decision on quantitative easing, at which time some investors believe that policy makers will refrain from making changes until the end of 2013. Meanwhile, investors bought Gold Futures subsequent to employment releases, causing Futures for Delivery in December to spike to a three-week high.
The euro traded steady against its U.S. counterpart, but later jumped close to a 24-month high as news out of the U.S. triggered a massive buy up of euros. President of the european Central Bank, Mario Draghi, reminded the region that the bank has not changed its stance and will continue to react in an “accommodative manner.” His comments came after the E.U. reported lower inflation, while a member of the ECB stated that another decline in inflation may warrant a change in easing measures. The British Pound also advanced versus the U.S. currency subsequent to the less than stellar Non-Farm Payroll reports. Positive comments by the Bank of England’s deputy governor, together with news that the U.K.’s Public Sector sustained a narrowing of the budget deficit, prompted the Sterling to rally further. And to everyone’s surprise, despite the surge in risk appetite, the Swiss Franc advanced to twenty-month highs against the greenback after the Labor Department issued weak Non-Farm Payroll data.
The yen reversed trends, but gained on the release of employment metrics out of the U.S., and dipped against the euro as the latter regained strength after investors raised speculation that the Federal Reserve won’t reduce stimulus when it meets this coming week.
Lastly, in the South Pacific, Australia’s dollar was bolstered by news which showed that Billiton Ltd. raised its iron ore production expectations. Speculators pared wagers that the Reserve Bank of Australia will cut the cost of borrowing money. Demand for the Aussie and New Zealand’s dollars rose in anticipation of the U.S. jobs report.
EUR/USD: Inflation Drops
The euro sustained a major increase against the U.S. dollar following the announcement of employment figures which prompted investors to shy away from the greenback. The less than stellar numbers helped bolster speculation that the U.S. central bank may postpone its plans to reduce bond purchases until December of perhaps the start of 2014. Meanwhile, on the data front, Germany reported a slight increase of 0.3 percent in PPI, denoting that the economy was somewhat sluggish. The european Central Bank hopes to achieve an inflation target below 2 percent; however, recent reports have fallen short of the bank’s goals. Policy makers refuse to cut the benchmark interest rate so as to be able to bolster inflation.EUR/USD Hourly Chart" title="EUR/USD Hourly Chart" width="600" height="380" src="https://d1-invdn-com.akamaized.net/content/picaf9e4db6ece04db581494fa0494e38cf.png">
GBP/USD: Budget Deficit Shrinks
The British Pound advanced against the U.S. dollar subsequent to the release of the downbeat U.S. employment report which indicated that American employers added fewer payrolls than predicted. Earlier during the euro-zone’s trading session, the U.K. indicated that the budget deficit contracted in September, posting at 11.1 billion rather than the previous 12.1 billion Pounds. The report showed that the budget did not include support provided to financial institutions. At this time, surveys forecast that the U.K. may reveal an economic expansion of 0.8 percent. However, the Deputy Governor of the Bank of England suggested that the improvement for the U.K.’s economy may be considered moderate by “historic standards.”GBP/USD Hourly Chart" title="GBP/USD Hourly Chart" width="600" height="380" src="https://d1-invdn-com.akamaized.net/content/picf073dd48d9df32aed7aedbd60f2942bf.png">
XAU/USD: Gold Up On Jobs Report
Gold prices inched $14.00 up after the U.S. dollar tumbled following lackluster employment metrics. Analysts usually say that when the dollar is down, gold is up, and Tuesday’s charts confirmed this to be true. The precious metal came very close to $1,338.00 shortly after the release, which was the highest it has traded at in three weeks. It’s anticipated to extend gains should the U.S. currency remain weak. The economists surveyed had estimated that 185,000 jobs would be created, but the data showed that only 148,000 payrolls were added. Futures for delivery in December dipped slightly to $1, 331.40 a troy ounce on the Comex division in New York.
USD/JPY: Yen Remains Under Pressure
Despite the yen’s gains against the greenback after the U.S. Department of Labor published the employment reports for September, the Japanese currency remained under pressure. This was due to the recent release which indicated that both exports and imports were down. The drop in imports was anticipated as the yen depreciated, making goods from abroad more expensive. However, the decline in exports came as a surprise. Meanwhile, Prime Minister Shinzo Abe and the head of the central bank, Haruhiko Kuroda, are exerting caution in the decisions they make in order to ensure the economy grows. Other reports revealed that Barclays reduced Japan’s growth forecast to a yearly rate of +0.3 percent for the third quarter, instead of +2.2 percent, citing the drop in exports and consumption as the main reasons.USD/JPY Hourly Chart" title="USD/JPY Hourly Chart" width="600" height="380" src="https://d1-invdn-com.akamaized.net/content/picc731c0529bf7def4e771cb7d16edc2de.png">
Today’s Outlook:
Today’s economic calendar shows that the U.K. will report on BBA Mortgage Approvals and the Bank of England will release the Monetary Policy Meeting Minutes. The U.S. will issue the Import Price Index as well as House Price Index. The euro region will publish data on Consumer Confidence. New Zealand will announce the Trade Balance. And China will provide metrics on HSBC Manufacturing PMI.