The U.S. dollar rate remained unchanged against several majors as investors opted for remaining on the sidelines ahead of the european Central Bank’s meeting and U.S. Non-Farm Payroll reports due out today. However, the greenback gained against the yen. The number of individuals who filed for Jobless Benefits in the U.S. dropped below a three-month low. The U.S. Department of Labor said that Claims for the week that ended on February 28 dropped by 26,000 to an adjusted 323,000, beating expectations for a decline of 11,000 claims. In addition, Continuing Employment Benefit Applications for the week that concluded on February 21 dipped from 2.915 million to 2.907 million. Subsequent to the announcement, the U.S. dollar rallied against the euro. Meanwhile, Gold prices traded below the highest price reached in over sixteen weeks while market traders took time to assess the health of the world’s biggest economy before the announcement of key employment data. The shiny metal gained 11 percent this year on worries that the U.S. economy is not showing signs of steady progress, and as a result of greater demand for safety, given the recent crisis between the Ukraine and Russia. Bullion for immediate delivery declined 0.1 percent and traded at $1,335.88 an ounce during the morning hours in London. On March 3rd the precious commodity advanced to the highest level since last October. And Futures for April delivery dipped 0.3 percent, reaching $1,335.80 on the Comex Division of the New York Mercantile Exchange.
The euro erased some of its gains against the U.S. dollar. At a recent press conference, Mario Draghi, the head of the ECB, indicated that the bank will publish its projections for 2016 somewhat earlier than expected. Analysts believe that this projection will be important and will be a key consideration when bank officials next meet on policy decisions. The shared currency rallied on Thursday after the ECB announced that it would leave monetary policy unchanged, and the interest rate would remain at 0.25 percent. The bank also said that the marginal lending percentage will remain at 0.75 percent and the overnight deposit rate at zero. The British pound strengthened against the greenback as the Bank of England left the benchmark interest rate at a record 0.5 percent, and made no changes in quantitative easing, which remains at 375 billion pounds. The Sterling came close to a four-year high as reports from the central bank showed that security holdings bought as part of the committee’s asset purchasing program now stand at 8.2 billion pounds.
The yen traded at a two-week low against the U.S dollar as an advisory panel indicated that the Japanese government’s pension fund does not have a need to focus on domestic bonds since inflation has increased. The yen weakened across the board on speculation that the tensions between Ukraine and Russia will continue to drop, diminishing demand for harbor currencies.
Lastly, in the South Pacific, the Australian dollar gained for a fourth day in a row on data confirming that Retail Sales climbed three times quicker than analysts anticipated, while the country’s Trade Surplus widened. News showing that several global economies are recovering also bolstered risk appetite, a factor that supported the Aussie’s strength. New Zealand’s dollar surged to over four-month highs versus its U.S. peer as investors wondered what the ECB would decide during its next policy meeting.
EUR/USD: ECB Maintains Status Quo
The EUR/USD surged after the european Central Bank issued its policy decision, confirming what economists had previously anticipated. Policy makers decided to leave monetary easing unchanged, and the interest rate at 0.25 percent. But according to some analysts, market traders shrugged off comments by the ECB President Draghi and increased speculation that the central bank could announce the tightening of monetary policy once it assesses new data and has had time to formulate its forecast for 2016. The numbers issued last Friday denoting that the yearly rate of inflation stayed at 0.8 percent did not appear to matter at this point.
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GBP/USD: No Changes Announced
The GBP/USD remained strong as the U.K.’s central bank announced it would leave the bond-purchasing program at 375 billion pounds while reinvesting 8.1 billion pounds in funds. The Bank of England had mentioned it planned to keep the purchased assets until the first hike in the key cash rate. The BOE also left the benchmark interest rate at 0.5 percent. Economists have said that they were not surprised by the recent reports on construction, as many parts of the U.K. have been seriously damaged by storms; the region of Dawlish even reported that its railway line was totally destroyed. However, the PMI suggests that future numbers will come in strong since employment in the sector rose to a three-year high and projects in civil engineering surged at the quickest pace since 1997. Services PMI printed at 58.2 rather than the predicted 58.
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USD/JPY: Inflation Quickens
The USD/JPY rose as the political tensions between Russia and the Ukraine dissipated. Meanwhile, the U.S. released the Beige Book, which showed that the severe winter season was to blame for a slowdown in activity in January and part of February; however, the current outlook looks more positive. The solid report boosted speculation that the Federal Reserve may continue to taper stimulus. In Japan, economic releases revealed that a depreciation of the currency contributed to a hike in tourism in 2013. Other announcements indicated that the country’s government pension fund contains 128.6 trillion yen and will seek yearly revenues of 1.7 percent. Officials stated that the pension investment fund will no longer require domestic bonds as inflation has risen. The USD/JPY received investor support as Russian and U.S. Diplomats gathered in Paris to discuss the recent regional crisis. U.S Secretary John Kerry urged Russia to keep its “legal obligations” for a unified Ukraine.
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AUD/USD: Trade Surplus Widens
The AUD/USD rallied to the highest rate in over one week as domestic news indicated that January’s Trade Surplus climbed to the most in 2½ years, and Retail Sales rose three times quicker than economists anticipated. According to the Statistics Bureau, the Trade Surplus came in at AUD$1.43 billion ($1.29 billion). Economists explained that the expansion was mainly due to the hike in iron ore and gold exports. Retail Sales jumped 1.2 percent in January, more than the predicted 0.4 percent. The solid releases fueled speculation that the Reserve Bank could raise the key cash rate in the coming months, despite the fact that policy makers said they would rather see a prolonged period of stable interest rates.
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Daily Outlook: Today’s economic calendar shows that Switzerland will report on the Unemployment Rate and CPI. The U.K. will issue Inflation Expectations. The U.S. will release the Average Hourly Earnings, Non-Farm Payrolls, Private Non-Farm Payrolls, Trade Balance and the Unemployment Rate. Lastly, China will publish Trade Balance metrics.