Euro Gains As Treasuries Tumble

The euro rose to a two-month high and Treasuries fell after fewer individuals recorded U.S. jobless cases and the European Central Bank left premium rates at a record low.

U.S. stocks pared increases as medicinal services organizations slid while palladium headed additions around precious metals.

As the Yen fell in value by 0.8 percent on March 6, 2014 in New York, the Euro rose in value by 0.9 percent to $1.3861. The yields on Ten Year Treasury showed a rise the third day. Moreover, the MSCI ACWI (Morgan Stanley Capital International – All Country World Index) rose 0.5 percent, led by emerging markets. The Standard and Poor Index showed a progress of 0.2 percent to 1,877.03. The Rubble fell sharply whereas palladium rose to a one year high.

The claims for American unemployment benefits declined to a three month low, strengthening optimistic views over the jobs market. The European Central Bank kept the interest stable as the economic output and inflation reduced the need for officials to act, that was the main reason behind the euro strength.

The Global Stock Markets are currently trading at possibly the highest level in more than six years, with Morgan Stanley Capital International’s World gauge rising 0.6 percent in value.

The Job Market Data
The nonfarm payrolls report, released by the Labor Department, reveals the number of workers that were added by companies in the US. The recent release of nonfarm payrolls revealed that the non-farm payrolls increased by 15,000 in the month of February whereas the rate of unemployment was 6.6 percent. Payrolls on the other hand increased by a monthly average of 193,500 in the year 2013. Euro came under pressure after the nonfarm release but then resumed the upside movement.

It is pertinent that the Federal Open Market Committee (FOMC) monetary policy meeting is going to take place from March 18 to 19. The policymakers are likely to announce yet another trimming in the monthly stimulus worth $65 billion amid surprise increase in the nonfarm payrolls. So by the end of March, we expect considerable downside movement in Euro.

Elsewhere, the Standard and Poor’s 500 (S&P 500) on 6th March 2014 completed the fifth year of a rally from its lowest intraday level during the bear market that was triggered by the global financial meltdown of 2008.

Euro, Yen, European Inflation and German Bonds
In addition, the Stoxx Europe 600 Index (as of 6th March 2014) climbed to its highest closing level in six years during the session. After making an announcement to give shareholders $334 million, Aggreko Plc climbed 3.5 percent. Bouygues SA (EN) after making its bid for Vivendi SA (a French Multinational Mass Media and Telecommunication Company) rallied 6.6 percent.

Finance experts believe that there is no reason whatsoever for the equity market to stop climbing. With the European and US economies recovering and the problems in Emerging markets, investors still find it safe to invest in safer economies.

According to the President of the European Central Bank (ECB), inflation in the Euro region in the next two and a half years will accelerate, thereby giving a signal that deflation risks that are faced by the economy may abate. In addition, the European bank is also committed to keeping its interest rates low for an extended period to support the economic recovery.

In contrast to its sixteen counterparts (except for the Australian dollar), the Euro ticked up. As of this writing, Euro/Dollar (EUR/USD) has completed the upward wave on the daily chart. The pair faced strong rejection near a multi-month trendline resistance. So the technical analysis is also showing some steep fall in the Euro. Furthermore, in contrast to dollar, the Yen fell to a five week low after the declaration of an advisory panel that asserted that the Japanese Government Pension Investment funds do not need to focus on domestic bonds.

Furthermore, yields on ten year British Gilts climbed 0.05 percentage points and reached 2.27 percent as the Bank of England (BoE) left its benchmark interest rate at 0.5 percent. Since March 2009, the Central bank has maintained borrowing costs at a record low, which is perhaps the longest ever stretch of unchanged policy since the 1940’s.

The bond yield of ten year German bond increased four basic points to 1.65 percent whereas the bond yields of ten year Spanish bonds climbed four basic points to 3.40 percent. The Morgan Stanley Capital International (MSCI) emerging markets index climbed consecutively for the third day (on March 6, 2014) advancing 1.2 percent. The Indian rupee rose in value by 1 percent to 61.12 per dollar and the Shanghai Composite Index climbed 0.3 percent, led by the housing market.

As far as the performance of commodity markets is concerned, the US based exchange traded funds invested $0.09 million in Russian equities on 6th March 2014. Still these funds have lost 14 percent of their total assets this year. In addition, the Palladium futures peaked 1.1 percent on the New York Mercantile Exchange to $781.15 an ounce after touching $785, the highest level for the most active contract since March 8, 2013.

So during the next couple of weeks, we expect considerable downside movement in Euro as well as the precious metals, while Dollar/Yen (USD/JPY) could gain some real bullish momentum. The FOMC monetary policy meeting will also be quite significant. Euro might test 1.3600 handle if the Federal Reserve announces yet another tapering in the stimulus.

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