The US dollar rebounded after a sharp drop in U.S. jobless claims, which lifted the outlook that the job market is picking up. Despite optimism, investors remain wary about a jobs recovery. Small companies are still laying off workers. Tomorrow's closely watched monthly U.S. nonfarm payroll report will provide the market more insight on the economic recovery. The U.S. economy is expected to cut 328,000 jobs in July, less than the 467,000 reported in June. The unemployment rate is expected to rise to 9.6 percent from 9.5 percent. Trading is expected to be volatile ahead of the release.
The euro softened after the European Central Bank left its interest rate at 1 percent and said it sees a gradual recovery in 2010. Yesterday, the euro jumped higher after Goldman Sachs raised its U.S. growth forecast for the second half of 2009 from 1 percent to 3 percent, boosting hopes that the global recession is bottoming out.
The British pound also fell after the Bank of England left rates at a record low 0.5 percent and unexpectedly increased its asset-purchase plan, indicating that financial conditions remain weak. Recent sterling strength has been boosted by positive domestic data such as manufacturing, consumer confidence, retail sales, and house prices.
The Japanese yen weakened after a Ministry of Finance report revealed Japanese investors bought more overseas stocks than they sold last week.
The Canadian dollar fell as crude oil prices, the nation's largest export, dropped. Investors started to take profit on speculation that gains may be overdone. Canadian Finance Minister Jim Flaherty recently expressed again his concerns of a strong currency hurting the country's exports and that there were “steps that could be taken” to curb gains in the Canadian dollar. The market is looking ahead to the outcome of the jobs data. Canada is expected to lose 17,500 jobs in July which would push the unemployment rate to a 11-year high of 8.8 percent.
The Australian dollar jumped higher on surprising news that 32,200 new jobs were created in July while a decline of 18,000 was expected. The jobless rate held at 5.8 percent. The data cemented talk that Australian rates may be among the first in the world to rise. Analysts expect the Aussie to remain range bound for the rest of the week as investors remain cautious ahead of the release of the U.S. non-farm payrolls data tomorrow.
The New Zealand dollar fell, dented by news that its jobless rate increased to 6 percent last quarter from 5 percent in the previous three months.
The Mexican Peso received a boost after Moody's Investors Service affirmed Mexico 's sovereign credit outlook.
10-Year Treasury Note Yield: 3.7382%
Dow Jones Industrial Average: 9,262.53 -18.44