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US$ Rallies on Strong Jobs Data, Unemployment Falls to 8.3%

The U.S. dollar was largely unchanged against the majority of its major counterparts as traders awaited the U.S. jobs report this morning and global stocks seesawed.  The greenback did gain versus its Canadian rival as Canada’s unemployment rate unexpectedly increased.  The U.S. dollar has gained this morning as the U.S. economic docket bettered expectations.  Employment climbed more than forecast in January and the U.S. jobless rate unexpectedly fell to the lowest level in three years.  The 243K increase in jobs was the most since April and exceeded all forecasts in a Bloomberg survey, Labor Department figures showed in Washington.  The unemployment rate fell to 8.3% from 8.5%, the lowest since February 2009.  The data may boost the dollar in the medium term as the positive data may give the Federal Reserve the scope to keep its bond-purchase program in tact and not partake in another round of so-called quantitative easing.  Later the Non-Manufacturing Composite is expected to expand to 53.2 from 52.6 in the month prior.  Also factory orders are expected to rise 1.5% in December, from 1.8% in November.

The Euro remained largely unchanged overnight as the market braced for the release of the U.S. employment numbers, which came out overwhelmingly positive, sending equities higher. In Europe, Greek officials continue to haggle over the proposed debt-swap, now looking to impose at least a 70% loss for bondholders. The Euro-Zone PMI services and composite came in at the expected 50.4/50.3 this morning, as retail sales were worse than forecasted at –0.4% on the month, and –1.6% on the year. The poor retail sales in Europe combined with the positive U.S. employment numbers show a growing trend of divergence between the two currencies, proving to be very dollar positive. German and Italian PMI services fell from last month, while the French PMI services showed improvement.

The British pound fell nearly three tenths against the dollar following the fall in the U.S. unemployment rate to 8.3%. The sterling has remained largely unchanged against the euro, as talks heated up yesterday about the possibility of the Bank of England increasing its quantitative easing program an additional 75B, to 350B. U.K. PMI services increased from 54.0 in December to 56.0 in January, better than the expected 53.3.

 

US$ Falls As European Stocks Rally

The U.S. dollar weakened across the board overnight before paring some its losses in early trading as European equities rose more than 1.0%.  Risk appetite accelerated overnight after Greek Prime Minister Lucas Papademos said progress had been made in debt-swap talks with private bondholders.  The greenback fell the most versus the higher-yielding currencies.  Indeed, the New Zealand dollar advanced 1.0% and the South African rand rallied 0.8% over the U.S. dollar.  The Canadian dollar rose to a three month high today even as the country’s economic activity contracted in the fourth quarter of 2011.  GDP fell 0.1%, failing to meet expectations of a 0.2% expansion.  Later this morning, the S&P home price index is expected to show prices fell at a slower pace in the year to November as the real estate market continues to struggle.  Also, the Chicago Purchasing Manager is expected to rise to 63.0 from 62.2 the month prior.  Consumer confidence is also expected to rise to 63.0 in January from 62.2 in December. 

The Euro advanced versus the dollar as global stocks advanced. The MSCI world index, a free-float weighted equity index measuring developed world markets rose 6% this month, and 0.6% overnight. Yesterday’s much-anticipated EU summit generated mixed results. While the long-term goal of institutionalizing budgetary restraints to prevent reoccurrence is nearly completed, the most pertinent goal of reaching a debt-swap pact with Greek bondholders remained largely unsettled, though PM Lucas Papademos is still reported to be “strongly committed” to reaching a deal. German unemployment rate fell today more than forecasted, from 6.8% to 6.7%. French consumer spending fell in December 0.7%, while entire Euro-Zone unemployment increased as expected to 10.4%, up from 10.3%.

The British pound fell against the euro yesterday as reports came out depicting an optimistic outlook on the settlement of Greek debt. The sterling reached a ten-week high against the dollar as positive euro sentiment dampened demand for the greenback. U.K. mortgage approvals remained unchanged from the previous month, coming in lower than expected 54.0K, at 52.9K. Net consumer credit was worse than the forecasted 0.4B, reported at -.04B.

The Japanese yen remained in familiar ranges near 3-month highs against the U.S. dollar overnight.  Japan refrained from selling yen in the foreign-exchange market this month, the Ministry of Finance said today.  The nation sold the currency on October 31^st when it climbed to a postwar record.  Japan’s Finance Minister Jun Azumi maintains that his ministry is prepared to take “decisive” measures to curb the yen’s appreciation.  Meanwhile, the economic docket showed that Japan’s industrial production rose more than forecast in December.  A separate report showed that Japan’s unemployment rate unexpectedly rose last month as the strengthening currency continues to squeeze manufacturers.  The jobless rate was 4.6% in December. 

US$ Rallies Across the Board as Stocks Fall

The U.S. dollar rallied across the board, gaining for the first time in six days against the Euro, as traders shed riskier assets.  The greenback rose the most against the South African rand and the Australian dollar as stocks fell, damping demand for higher-yielding assets.  Indeed, the Stoxx Europe 600 index of shares dropped 0.7% and S&P futures slid 0.5%.  Meanwhile, the U.S. economic docket showed that consumer pending stalled in December, ending 2011 on a weak note that raises concern the biggest part of the U.S. economy will cool.  Purchases rose 0.0%, failing to meet expectations of a 0.1% gain.  Personal incomes climbed 0.5% last month, the most since March after a 0.1% gain the prior month.  Tomorrow sees the release of S&P Case/Shiller Home price index, Chicago Purchasing Manager and Consumer Confidence, followed by ADP private employment, construction spending and ISM manufacturing on Wednesday.  Weekly jobless claims are slated for Thursday, while non-farm payrolls, the unemployment rate, ISM non-manufacturing and factory orders will round out the week on Friday. 

The Euro fell nearly a percent against the dollar overnight in anticipation of the first EU summit of 2012. The EU leaders will meet today in an attempt to put the finishing touches on private sector involvement (PSI). Last week it was reported the two sides were close to an agreement on a lower coupon rate and larger haircut to settle Greek debt. Today’s meeting in Brussels will also look to finalize the new deficit control treaty to prevent meltdown reoccurrence. The German consumer price index numbers were unveiled on par with expectations at 2%, the lowest figure in a year. Italy’s business confidence fell in January, down to 92.1 from a previous 92.5.  Italy sold 7.5 billion euros of debt due between 2016 and 2022 today, less than its maximum target of 8 billion euros. 

The British pound strengthened against the euro and weakened against the dollar as investors look for safer bets in preparation for the EU summit. As a result, 10-year U.K. gilt yields fell the most in seven weeks, to 1.98%.  Hometrack Ltd said U.K. home prices stalled last month and remain under “downward pressure.”  The economic docket this week will look to Wednesday’s PMI manufacturing number, and the nationwide house prices, both expected to slightly improve.

US$ Rallies as Stocks Fall, U.K. Economy Contracts

The U.S. dollar rallied overnight as European equities and American stock futures both declined, boosting demand for the greenback.  The U.S. dollar rose the most against the South African rand amid signs that the global recovery is faltering.  The Canadian dollar fell for the second straight day as the price of crude oil retreated.  This morning’s economic docket showed that mortgage applications in the U.S. fell last week as borrowing costs climbed from a record low.  The Mortgage Bankers Association’s index decreased 5.0% after jumping 23.0% in the prior week.  Later, the house price index is expected to hold flat from the month prior when it declined 0.2%.  In addition, pending home sales are expected to have shrunk 0.1% in December after climbing 7.3% in November.  This afternoon, the Federal Reserve’s FOMC will announce their interest rate decision.  Its is widely expected that the Fed will leave interest rates unchanged at 0.25%, however, commentary following the release could affect the direction of the U.S. dollar.  

The Euro weakened versus the dollar overnight, a day after the finance ministers were once again unable to solidify plans to settle Greek debt.  The common currency came under pressure after the European Central Bank was said to oppose restructuring its Greek bonds.  The ECB faces pressure to join private-sector investors in taking losses, but the central bank sees this as potentially damaging to the confidence in the institution.   A successful auction of German 30-year bonds garnered more than the targeted 3 billion euros today, while the German IFO business confidence rose for a third consecutive month to108.3, from 107.2 the previous month. Focus remains squarely on January 30^th , as the EU summit’s ability to come away with something resembling a solution to the deepening debt crisis will be tested. 

The sterling fell overnight as GDP fell 0.2% compared to the expected 0.1%, signaling a real possibility of a second recession in three years.  In addition, the pound remains under pressure on speculation that the Bank of England will increase its asset-buying program.  Earlier this month, the BoE unanimously voted to keep the quantitative easing program unchanged at 275B pounds, although monetary policy makers are not ruling out an increase in the coming months if inflation allows. Indeed, BoE Governor Mervyn King said yesterday that policy makers an increase stimulus again if needed to guard against a “renewed severe downturn.” 

The Japanese yen fell to near its weakest level in two months against the U.S. dollar after Japan reported its first annual trade deficit in 31 years.  Japan’s Ministry of Finance reported that the nation’s exports dropped 8.0% in December from a year earlier.  The figures show the impact of slower global growth and March’s earthquake on the economy.  The declines in shipments from Japan resulted in a 2011 trade deficit of 2.49 trillion yen. 

US$ Falls On Greek Optimism, Pending Postive U.S Data

The U.S. dollar fell against nearly all of its major counterparts, touching a two-week low versus the Euro as global equities rose and over speculation European officials meeting today in Brussels with make progress on a plan to fix the Greek debt crisis.  There is no major economic data slated for release today in the United States, but the greenback has fallen the most against the higher-yielding Australian and New Zealand dollars ahead of economic calendar that is expected to paint a strong outlook for the U.S. economy.  Tomorrow, the Federal Reserve Bank of Richmond will say the overall business activity index for the central-Atlantic region climbed to 7 from 3 last month.  Wednesday, pending home sales will fall 1.0% and the Federal Reserve will announce its interest rate decision.  Thursday sees the release of weekly jobless claims, durable goods orders and leading indicators.  On Friday, U.S. gross domestic product is expected to have expanded at a 3.0% annual rate in the fourth quarter.

The Euro advanced against the dollar to the highest levels in more than two weeks, as finalizing terms of the Greece bailout will be a key moving forward this week. The EU finance ministers will meet today, with a larger EU summit on the horizon next week, in what they hope will solidify the degree of private sector involvement in the bailout of Greece. On today’s economic docket, the Euro-Zone January consumer confidence is expected to stay relatively steady, at –21.1.

The sterling stayed relatively unchanged over the weekend, after a week that showed the pound gain just under 2% on the dollar. The U.K. continues to show an elevated risk of surpassing the Bank of England’s target inflation of 2%, as the forecast of no growth over the fourth and first quarters continues to be reported.