Euro Plunges on Trichet

The dollar rallied sharply against the euro in New York trading, rebounding from 1.5908 to beneath the 1.57-level at 1.5683.

More than 200 pips!

Ahead of a long weekend holiday in the US, traders digested a barrage of economic events earlier in the session prompting a sharp reversal in the euro from its 2 ½-month highs, falling by over 2 big figures.

The closely watched US labor report was largely inline with expectations, with the June non-farm payrolls slightly above forecast at -62k, from -49k.

Meanwhile, the unemployment rate in June was higher than expected at 5.5% and unchanged from the previous month.

Despite further losses in non-farm payrolls, the dollar found some respite since markets were preparing for an even greater loss of jobs following yesterday’s unexpectedly disappointing ADP private-sector payrolls report, which declined by 79k.

The June non-manufacturing ISM report missed consensus estimates, dipping beneath the key 50-level which distinguishes between contraction and expansion, to 48.2 versus calls for a smaller decline to 51.0 from 51.7.

At the same time the jobs data was released, ECB President Jean-Claude Trichet said the current level of euro zone interest rates would help achieve the bank’s price stability goal.

The ECB earlier raised its key rate by a widely expected quarter percentage point to 4.25 percent.

Analysts said the remarks suggest the ECB rate hike was a one-off event and that further rises will depend on economic data. Trichet also said downside risks to the euro-zone economy persist.

Technorati Tags: ECB, Trichet, Euro, USD, fvarga

Dollar Spikes Higher Versus Euro After Jobs Report, ECB Rate Call

The dollar spiked higher against the euro Thursday morning as traders weighed the Labor Department’s monthly jobs report and ECB’s President Jean-Claude Trichet’s comments accompanying the central bank’s decision to hike its key interest rate.

US Non-Farm payrolls dropped 62,000 in June, according to data release by the Labor Department Thursday morning. The result came roughly in line with estimates. The unemployment rate held steady at 5.5 percent.

Meanwhile, the ECB chief told reporters that policymakers raised the EU’s key overnight rate 25 basis points to 4.25 in order to combat the second round effects of inflation, including spiraling wages. Trichet noted that risks to price stability in the medium term remain to the upside and have increased.

The dollar spiked higher versus the euro, rising to 1.58 from a two-month low of 1.5907, set just before the ECB rate call at 7:45 am ET.

Technorati Tags: American Economy, ECB, fvarga

Weekly Jobless Claims Jump To 404,000

While the data is likely to be overshadowed by the monthly employment report, the Department of Labor also released its report on initial jobless claims in the week ended June 28th on Thursday, showing that jobless claims increased by much more than expected.

The report showed that jobless claims rose to 404,000 from the previous week’s revised figure of 388,000. Economists had been expecting jobless claims to edge up to 385,000 from the 384,000 originally reported for the previous week.

With the increase, jobless claims rose to their highest level since the week ended March 29th, when jobless claims surged up to 406,000.

The Labor Department also said that the less volatile four-week moving average jumped to 390,500 from the previous week’s revised average of 379,250.

At the same time, the report also showed that continuing claims in the week ended June 21st fell to 3.116 million from the preceding week’s revised level of 3.135 million.

Technorati Tags: American Economy, Employment, fvarga

ECB Hiked Its Benchmark Rate

As expected, the European Central Bank hiked its key interest rate by 25 basis points to 4.25 percent Thursday morning.

Traders will now be paying close attention to ECB President Jean-Claude Trichet’s accompanying comments, looking for clues about whether further rate hikes are in the cards.

With the rate hike already priced in, there was little immediate movement in the euro/dollar pair on the news.

The euro hit a 2-month high of 1.5902 minutes before the decision, but has since leveled off to 1.5880.

Obviously, traders are waiting the NFP, released within 20 minutes from now (20:10 - GMT+8  ).

Technorati Tags: ECB, Interest Rate, Euro, USD, fvarga

Oil Rises to Record Above $144

Crude oil rose to a record above $144 a barrel in New York as the European Central Bank is poised to increase interest rates and U.S. stockpiles unexpectedly fell to their lowest since January.

Economists are forecasting the ECB will raise its 4 percent benchmark rate by a quarter percentage point today, weakening the dollar and spurring commodity buying as an inflation hedge.

Investors are purchasing oil, which has doubled this past year, as U.S. equities slump, with the Standard & Poor’s 500 Index falling yesterday to its lowest level in two years.

Crude oil for August delivery climbed as much as $1, or 0.7 percent, to $144.57 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. It was at $144.45 at 3:07pm in Singapore.

 

Technorati Tags: Oil, ECB, fvarga

ECB Hike Expected; Will US Economy Lose More Than 100K jobs?

The dollar traded near a two-month low against the euro on speculation U.S. payrolls dropped for a sixth month and the European Central Bank will signal more than one interest-rate increase is needed to curb inflation.

The Labor Department will probably report today that U.S. employers eliminated 60,000 jobs including government positions last month, according to the median forecast of 79 economists surveyed by Bloomberg.

The dollar weakened 1.2 percent against the euro and 1 percent versus the yen on June 6, when the government reported that the U.S. lost 49,000 jobs in May.

Expected data is -60K for the NFP.

The dollar dropped to $1.5895 per euro, the weakest level since April 24, before trading at $1.5891 at 11:52am in London, from $1.5882 yesterday in New York.

The U.S. currency fell to a record of $1.6019 per euro on April 22. The dollar was at 106.30 yen from 105.91. The euro rose to 169.13 yen, the highest in a week, and was at 168.95 from 168.20.

Technorati Tags: American Economy, Euro, ECB, USD

Euro Extends Gains Against Pound and Greenback

The European single currency extended earlier uptrend against its British and US counterparts during New York afternoon deals today.

As of now (08:20 - GMT+8  ), the euro is trading near 0.7969 versus the British pound and 1.5883 against the US dollar.

Against the Japanese yen, the euro is worth 168.36.

Technorati Tags: Forex, Euro, fvarga

Dollar Slides on ADP

The dollar fell sharply following this morning’s ADP private sector payrolls report, dropping to a fresh 10-week low versus the euro at 1.5885 and beneath the 106-level versus the yen.

The June ADP private-sector payrolls declined by more than expected, posting a loss of 79k jobs, far steeper than the forecasted loss of 20k jobs from 40k jobs created in May.

The disappointing jobs data bodes poorly for tomorrow’s June labor report, with consensus estimates for non-farm payrolls calling for a loss of 60k jobs while the unemployment rate is forecasted to improve to 5.4% from 5.5%.

In addition to the ADP report, data releases on Wednesday also included May durable goods orders and factory orders.

The revised May durable goods orders were in line with expectations and unchanged from the preliminary reading, while the excluding transportation figure improved marginally, posting a marginal improvement to -0.8% from -0.9%.

May factory orders were slightly better than expected at 0.6%, beating calls for a larger decline to 0.4% from 1.1% previously.

Technorati Tags: American Economy, Employment, USD, fvarga

Asian Currencies: TWD Stronger

Taiwan’s dollar climbed more than any Asian currency this year as improving relations with China bolstered investor confidence in the island’s economy.

The currency climbed 6.8 percent against the U.S. dollar, beating the 6.5 percent gain in the Chinese yuan, as charter flights will start between Taiwan and China this month.

Taiwan’s economy grew 6.1 percent in the first quarter from a year earlier as exports of electronics and chemicals to China helped the island weather a U.S. economic slowdown.

Taiwan’s currency reserves have almost doubled in the past five years to $290 billion and the trade surplus was $2.2 billion in May. The central banks on both sides of the 100-mile (161-kilometer) Taiwan Strait have allowed their currencies to appreciate to moderate inflation.

Other Asian currencies do not share the same fortune.

Asian currencies with smaller surpluses under-performed this year. The Thai Baht dropped 11 percent, the most in Asia, as the current account turned into a deficit and protesters laid siege to the Prime Minister.

The Philippine peso weakened 8.3 percent as record rice costs sent President Gloria Arroyo’s popularity to the lowest since 2005.

The South Korean won lost 10.6 percent as record oil prices widened its trade deficit and prompted a strike by truck drivers that brought ports to a near standstill.

The Taiwan dollar climbed 0.2 percent in June to NT$30.354, the second monthly gain and was little changed at NT$30.371 today.

The yuan, up 1.3 percent last month is trading at 6.8584 per USD today.

 

Technorati Tags: Forex, Asian Currencies, fvarga

USD Weakens Before Payroll - Euro Remains Firm Ahead ECB Meeting

The Euro remains firm ahead of the ECB meeting on Thursday. Yesterday, the June consumer price index estimate came in at 4% double the central bank’s 2% inflation target.

Yesterday, Germany reported strong consumer spending and the lowest unemployment rate in 14 years. Manufacturing sector PMI for the Eurozone was also revised higher in the month of June due to stronger activity in France and Germany.

The combination of higher inflationary pressures and better than expected economic data could force the ECB to backtrack on their warnings and actually prepare the market up for more than one rate hike in the third quarter.

Up until now the ECB has openly hinted that a rate hike in July will one-off, but given the recent reports, 2 rate hikes from the ECB this year is more than realistic.

Eurozone producer prices are due for release tomorrow and given the rise in wholesale sales and import prices, we expect the PPI number to be hot. A 50bp rate hike by the ECB on Thursday may not be out of the question.

Meanwhile Swiss PMI numbers hit a 3 year low while the prices paid or inflation component of the report jumped to a 1.5 year high.

The dollar traded near a three-week low against the euro before an industry report today that may show U.S. companies reduced jobs in June for the first time in four months.

The U.S. currency also traded near a three-week low versus the yen before government data tomorrow that may show employers in the world’s biggest economy cut workers for a sixth straight month, prompting traders to pare bets the Federal Reserve will raise interest rates.

The dollar traded at $1.5810 per euro at 11:01am in Tokyo from $1.5793 yesterday.

It touched $1.5836 on June 30, the lowest level in three weeks, and fell to a record $1.6019 on April 22.

The dollar weakened to 105.84 yen from 106.13 yen. It reached a three-week low of 104.99 yen on June 30.

 

Technorati Tags: Forex, USD, JPY, Euro, fvarga