EUR/USD
A stronger-than-expected industry report on hiring in the U.S. private sector strengthened the dollar against the euro on Wednesday by cementing expectations that official data will come in strong and keep the Federal Reserve on course to scaling back stimulus programs in early 2014. Payroll processing firm ADP reported earlier that non-farm private employment rose by a seasonally adjusted 215,000 in November, blowing past expectations for an increase of 173,000. November's figure was revised up to a gain of 184,000 from a previously reported increase of 130,000. Meanwhile in Europe, retail sales fell 0.2% in October compared to expectations for a 0.3% rise, according to official data. On Thursday, the European Central Bank is to announce its benchmark interest rate. The announcement is to be followed by a press conference with President Mario Draghi.
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GBP/USD
The pound softened against the dollar on Wednesday after an industry report on U.S. private-sector hiring beat expectations and kept hopes going for Federal Reserve to begin tapering its dollar-weakening monetary stimulus programs in the coming months. Stimulus tools such as the Fed's USD85 billion in monthly bond purchases aim to drive recovery by pushing down long-term interest rates, weakening the dollar as long as they remain in effect. Payroll processing firm ADP reported earlier that non-farm private employment rose by a seasonally adjusted 215,000 in November, blowing past expectations for an increase of 173,000. Meanwhile across the Atlantic Ocean, London-based Markit Economics said the U.K. services purchasing managers index fell to 60.0 in November from 62.5 in October, which was the strongest since May 1997. Analysts were expecting the index to decline to 62.0 last month. On Thursday, the Bank of England is to announce its benchmark interest rate.
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USD/JPY
The U.S. dollar edged up against the yen on Wednesday, to trade close to six-month highs as speculation over the future of the Federal Reserve's stimulus program supported the greenback, while expectations for more easing in Japan dampened demand for the yen. The dollar remained supported after the Institute for Supply Management said Monday that manufacturing activity in the U.S. expanded at the fastest rate since April 2011 in November, fuelling optimism over the economic recovery. Meanwhile, expectations that the Bank of Japan will have to expand its stimulus program in order to meet its target of 2% inflation by 2015 continued to pressure the yen lower. Earlier in the week, BoJ Governor Haruhiko Kuroda pledged to counter any new downside risks to the bank’s inflation goal, saying the BoJ would act by "adjusting monetary policy without hesitation."
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USD/CAD
The U.S. dollar edged up against its Canadian counterpart on Wednesday, to trade near three-and-a-half year highs after the release of upbeat U.S. employment data added to expectations for the Federal Reserve to soon begin tapering its monthly asset purchases. The greenback strengthened broadly after data showed that U.S. non-farm private employment rose at the strongest pace in nine months in November, fuelling optimism over the U.S. labor market. Payroll processing firm ADP said non-farm private employment rose by a seasonally adjusted 215,000 last month, blowing past expectations for an increase of 173,000. In Canada, official data showed that the trade balance swung into a surplus of CAD0.1 billion in October, from a deficit of CAD0.3 billion the previous month. Analysts had expected the trade deficit to widen to CAD0.7 billion in October.
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