US Dollar Rebounds Against Major Currencies on Upbeat Employment Data

Edited By Vani Rao

Posts weekly gains of 1.81% against the Japanese yen

The US dollar moved higher against the GBP on Friday, 7 March 2014, following stronger- than-expected data on the US employment report for February. According to the US Department of Labor report, initial jobless benefits last week fell by 26,000 to 323,000, bettering analyst estimates who were expecting jobless claims to fall by 11,000 to 338,000. The better-than-expected jobless claims data enabled the US dollar to hold itself against the GBP.

Meanwhile, on Thursday, the Bank of England (BoE) had left its interest rates unchanged at a record low of 0.5%. Additionally, in the policy meeting, the UK left its quantitative easing program stable at £375 billion.

The GBP/USD pair ended Friday’s session 0.15% lower at 1.6713. At the time of final reporting, the pair was trading at 1.6735, as shown in the graph below.

Source: Bloomberg
Source: Bloomberg

The UK and the US are slated to announce key data that are likely to trigger currency fluctuations between the pair. Analysts will be keeping a close watch on significant events in the weak ahead. Starting on Tuesday, March 11, the UK will announce data on manufacturing production. Meanwhile, BoE Governor Mark Carney and monetary policy committee members will affirm their outlook on inflation and the economic growth.

On Wednesday, March 12, the UK is expected to publish data on the government’s trade balance.

On Thursday, March 13, the US is expected to publish the weekly report on initial jobless claims and data on factory orders, in addition to data on retail sales and import prices.

Finally, on Friday, March 14, the US will announce data on producer price inflation, and the University of Michigan will publish preliminary data on consumer sentiments.

EUR/USD

The Euro advanced against the US dollar on 7 March, 2014 after reports from the European Central Bank (ECB) showed that banks in the Eurozone are poised to repay a large portion of their emergency three-year loans by next week.

Meanwhile, the US Bureau of Labor Statistics reported 175,000 job additions in February, surpassing expectations of a 149,000 increase. The strong data has further vindicated that the Federal Reserve is likely to continue to trim its stimulus program.

During the trading session on Friday, 7 March, the EUR/USD rose as high as 1.3915, the highest level since October 2011, before closing the day’s session at 1.3877, advancing 0.12%. For the week, the EUR/USD pair rose 1.03%. At the time of last reporting, the pair was trading at 1.3887, as shown in the graph below.

Source: Bloomberg
Source: Bloomberg

The Eurozone and the US are scheduled to release key data that are likely to track movements in the currency markets in the two economies. To begin with, in the Eurozone, France will publish data on industrial production on Monday, March 10.

On Tuesday, March 11, Germany will publish data on its trade balance.

On Wednesday, March 12, the Eurozone will come up with data on industrial production.

On Thursday, March 13, the ECB is expected to publish its monthly bulletin on current and future economic conditions from the bank’s perspective. Meanwhile, the US is to publish data on retail sales and import prices, in addition to its weekly government data on employment.

To end the week, on Friday, March 14, the US is to publish data on producer price inflation and the University of Michigan will release preliminary data on consumer sentiment.

USD/JPY

The USD/JPY pair rose to its highest levels since January 23, hitting 103.75, before closing Friday’s session 0.18% higher at 103.24, as shown in the graph below. For the week ended March 7, the US dollar gained 1.81% against the yen. At the time of final reporting, the USD/JPY pair was trading at 103.05.

The positive sentiment in the US dollar was boosted by the US Department of Labor’s report for February, which exceeded industry expectations. The US economy added 175,000 jobs in February, against the expected 149,000. The upbeat job data has relieved concerns about the US job market and other key economic indicators.

Source: Bloomberg
Source: Bloomberg

Japan and the US are scheduled to announce significant data in the coming week. Industry experts will be closely monitoring the data reports, which are likely to cause currency fluctuations. At the start of the week, on March 10, Japan will release revised data on the economic growth for the fourth quarter, in addition to data on current accounts.

On Tuesday, March 11, the Bank of Japan (BoJ) will announce its benchmark interest rate along with the monetary policy statement. The announcement is to be followed by a press conference.

On Wednesday, March 12, Japan will publish its Business Survey Index or the BSI on the manufacturing sector and a report on tertiary industry activity.

On Thursday, March 13, Japan is expected to announce data on machinery orders. Meanwhile, the US will release data on retail sales, trade prices, and the US government will release its unemployment report.

To round off the week, on Friday, March 14, the BoJ is to publish minutes of its monetary policy meeting, highlighting valuable insights about its economic health. On the same day, the US will release data on producer price inflation.

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