Overall, the currency market traded mixed during the overnight session, ahead of the two interest rate decisions. The European pairs (euro, pound and the swissy) lost ground against the dollar, the cad traded side-ways, while the aussie and the yen gained ground during the Thursday trading session. The market will likely re-align later in the day, after Mr. Trichet’s press conference.
The Euro (Eur/Usd) saw side-ways action during the first part of the overnight session. However, the London open dragged the pair lower, falling near the low reached on Wednesday. Later this morning, the ECB is expected to announce that the key interest rate has been cut by 25 basis points. Shortly after, traders will switch their focus to Mr. Trichet’s speech, where he is expected to announce a new quantitative easing program.
The Pound (Gbp/Usd) traded in similar fashion to the euro during the overnight session. The pair moved in a tight range during the Asian trading hours, but broke lower shortly after the London open. At 7am this morning, the BoE is expected to keep the interest rate on hold and announce that it will continue with the asset-buying program.
The Aussie (Aud/Usd) made a new high for the last six months of trading during the Asian session, after a positive report from the Australian labor market pushed the pair some 80 pips higher. Moreover, the aussie and the yen were the only pairs that were able to move decisively higher against the dollar.
Employment in Australia increased by 27.3K for April which is above expectations of 24.9K decrease. Full time employment Increased by 49.1K to 7,672,700 while part time employment decreased by 21.8K to 3,126,200. The unemployment rate in Australia decreased by 0.3 percent to 5.4 percent in April which is better than analysts’ forecasts of an increase to 5.9 percent
The Cad (Usd/Cad) consolidated during the overnight session, unable to develop a decent move. In the last period of trading, the pair declined at a strong pace, reaching the lowest level since November. Additionally, recent reports suggest the Canadian economy may be finding a bottom, which may provide relief to the Canadian dollar.
The Swissy (Usd/Chf) moved higher since the Thursday trading session began, gaining nearly 70 pips. With the overnight gains, the pair re-tested the resistance area formed by the 100 and the 200-day simple moving averages, two very important swing points over the last period.
The Swiss CPI gained 0.9% in April, much more than the forecasted rate of 0.6%. However, from one year earlier, the CPI stands at only -0.3%, in April, up from -0.4% in March. The last time when the year-over-year CPI was released negative for two consecutive months happened 1998
The Yen (Usd/Yen) continued to trade in volatile fashion during the overnight session as the pair managed to move back above the 20, 50 and the 200-day simple moving averages, which have acted as both support and resistance recently. The pair advanced 50 pips in the early Asian session, shed every pip as the market was heading towards the London open, but then bounced again some 60 pips higher, near the high reached on Wednesday.