Currency Pair Overview: Dollar Stronger After Volatile Trading Day

Overall The currency market endured a volatile day of trading on Thursday as S&P futures fluctuated overnight, global equity markets played tug-o-war and economic releases gave further insight to the U.S. economy. Currencies that are influenced by equity markets, the Japanese yen and Australian dollar shifted direction many times overnight as Asian markets pared gains after the release of Chinese GDP and European markets were cautious in anticipation of earnings from JPMorgan ahead of this morning’s opening bell. U.S. economic releases saw unemployment claims and the Philly Fed post better than expected numbers but housing starts and building permits reminded traders that the housing dilemma is still not over. At the end of the day, the dollar stood tall, once again, closing higher against most of the other currencies although earlier gains were pared after the economic releases.

The Euro (Eur/Usd) The euro continued its recent downward trend that started in mid March, losing another 50 pips on the day and closing below the 1.3200 level. Traders don’t seem to be totally convinced that the ECB will not drop interest rates below 1% despite strong ‘hinting’ that will be the case recently. Euro-zone industrial production dropped in February by 2.3% but that was less than had been expected. Annually, production was down 18.4%, the largest annual drop on record.

The Pound (Gbp/Usd) For the first time in four days, cable closed the trading day lower despite hitting the highest level in almost three months. After failing to close above the 1.5000 level on Wednesday, the pair pushed higher during last night’s Asian session but weakened as we heading into the London open. The pound has held firm against dollar strength this week, until today, and managed to pare about 80 pips of losses during the U.S. session. There were no economic releases from the U.K. this morning and the U.K. calendar is clear for the remainder of the week.

The Aussie (Aud/Usd) The aussie traded in a wider than average 180 pip range on Thursday, influenced by global equity markets trading in volatile fashion and gold prices moving lower by more than $18 an ounce on the day. The pair lost approximately 80 pips on the day and closed just above the 0.7200 level. The Australian dollar weakened after it was announced that China’s economy expanded at the slowest pace in 10 years, bring the global economic recovery into question. Asian equity markets pared gains on the news, the market became risk averse and traders sold higher yielding assets and moved to safety.

The Cad (Usd/Cad) The cad has been in a downward trend since March 10th and despite the dollar strengthening against its Canadian counterpart on Thursday, continues on that path. The cad strengthened for only the 3rd day in 13 helped by a lack of consistency in the equity markets. Crude oil prices rose on Thursday but continue to trade below the pivotal $50 a barrel level. The pair gained 50 pips on the day, unable to hold above the 1.2100 level, after trading in a 165 pip range. Canadian manufacturing sales rose for the first time in seven months, gaining 2.2% in February, beating analysts’ expectations. Canada will release CPI numbers at 07:00 EDT tomorrow morning.

The Swissy (Usd/Chf) The dollar strengthened against the Swiss franc on Thursday as the greenback strengthened in the broad market. Recent U.S. economic releases and comments from Fed officials has given hope that the economic downturn in the U.S. is slowing, the latest being Wednesday’s release of the Fed’s Beige Book, which has curbed demand for the franc. The pair traded in a relatively tight range and closed the day higher by approximately 40 pips. The Swiss producer price index decreased in March by 0.5% from February, more than analysts’ had expected. Swiss National Bank Chairman Roth will give a speech at 04:00 EDT tomorrow morning, and given that the SNB has intervened in the currency market recently, should be paid attention to.

The Yen (Usd/Yen) The yen endured a volatile 24 hours of trading as global equity markets moved back and forth throughout the day and the Japanese currency responded in kind. The pair moved higher during the opening hours of last night’s Asian session but quickly reversed course and moved significantly lower during the afternoon session and through the midpoint of this morning’s European session. News that China’s economy expanded at the slowest pace in 10 years called into question the global economic recovery, causing traders to become risk averse, and pushing Asian equity markets and U.S. futures lower. The pair pared losses during the U.S. session as equity markets moved higher and closed the day in positive territory. On the day, the pair moved in a range of 100 pips but closed lower by only 10 pips.