USD - The dollar rose to multi week highs as markets reassessed the outlook for the US economy following Friday's better than forecast jobs report. The US economy shed 11,000 jobs in November, handily beating forecasts at -130,000. The unemployment rate also improved to 10% from 10.2% previously. The much better than expected jobs report reinforced the view that the worst of the job losses had peaked and capped a week of positive economic US data. Earlier in the week, pending home sales rose 3.7% in October; car sales improved to an above forecast 3.87 million in November; and manufacturing expansion continued with the Purchasing Manager's Index at 53.6 in November; above the 50 threshold separating growth from contraction. The dollar rallied in response, snapping its string of recent losses built upon easing risk aversion, as markets pondered an earlier withdrawal of monetary stimulus measures in the US. The dollar is likely to remain resilient awaiting further information on the economy and the outlook for stimulus.
EUR - The euro fell to 5-week lows vs. the dollar following last Friday's improved US jobs report. In a reversal from last week's highs above $1.51, the single currency fell to lows at 1.4757 overnight as markets revised the timetable for the withdrawal of monetary stimulus in the US. Last week, the European Central Bank left interest rates unchanged at 1% but announced it would pare back the extra liquidity pumped into the market citing improving economic conditions. Euro Zone GDP was revised upwards to +0.4% in the 3rd quarter while the Purchasing Manager's Index registered expansion at 53.7. Unemployment in the region was 9.8% in October. Despite the improving economic conditions and withdrawal of monetary stimulus, euro gains are likely to remain limited as prospects for an improving US economy weighs on the single currency.
GBP - The GBP weakened against the USD and the EUR as investors bet the U.K. Treasury's pre-budget report will signal deterioration in the country's finances. The U.K. currency fell to the lowest level in more than a week against the dollar before the Dec. 9 pre-budget report. Chancellor
of the Exchequer Alistair Darling will lower his forecast for economic growth this year, a government official said. The Bank of England meets this Thursday to discuss UK monetary policy. While recent communication from the MPC would indicate that it is too soon to rule out the prospect of even further support to the economy. This month's meeting is unlikely to result in any policy changes, with the MPC not set to review its QE program until next February. With these event risks on the horizon the GBP is expected to remain under pressure in the short term.
JPY - The yen was proportionally driven by a move on the part of the markets back into riskier and higher yielding investments. The currency, which has long been a carry trade funding currency, fell 5.7% as investors reversed their stance on risk and sold the yen to fund into other opportunities. The yen began last week at a low of 85.91 and steadily rose for the rest of the week before settling for a close of 90.71. The yen was also hampered by re-merging rumors of intervention by the central bank. The yen fell against all major counterparts amid speculation policy makers will try to limit gains in the currency which reached a 14-year high against the dollar recently. Benchmark securities rallied after the central bank announced plans to meet, spurring speculation policy makers would
increase monthly bond buying from 1.8 trillion yen ($20.8 billion). Expect a weaker yen this week as investors seek yield.
CAD - Canada's currency traded within a 2% range of last week's session pushing from 1.0603 to as high as 1.0411 before relinquishing those gains for a 1.0577 close to the week. Crude oil was relatively contained trading between $75.25 and $78.96 a barrel. Natural gas was less prosperous after reaching a high of $5.19 it tacked down the rest of the week before settling at $4.44 close. Macro data was promising as well pointing toward an ever increasing economic recovery for Canada with Industrial Product Prices (-.3% vs. prior -.5%), Raw Materials Index (2.5% vs. -1.1%) and GDP for Q3 reaching 0.4% vs. Q2's -3.4%. Unemployment dropped slightly in November at 8.5% vs. the previous 8.6% for October. Economists were expecting more, however. To revive demand, Prime Minister Stephen Harper is planning a record C$55.9 billion deficit ($52.9 billion) and Bank of Canada Governor Mark Carney plans to keep his main lending rate at a record 0.25% through June. Expect a range bound loonie for this week.
MXN - The peso reached a high of 12.97 on last Monday's session before tracking a one-way path down 3.2% to a low of 12.56. Mexico's peso posted the steepest two-month gain against the dollar among major currencies after the global economic recovery increased the country's exports and investors hunted for currency bargains. Mexican remittances dropped the most on record in October as the impact of the U.S. economic slump continued to spur job losses and sap savings for nationals living north of the border. Money sent from workers living outside Mexico fell 36% to $1.7 billion in October from $2.6 billion in the same month a year earlier. The largest previous drop was a decline of 20% in May. CNY - The Chinese yuan weakened vs. the dollar to 6.8291 amid broad dollar strength. Chinese authorities announced that they will continue their loose monetary policy stance and proactive fiscal policy measures. Markets are forecasting the yuan to rise 2.89% over the next 12-ms vs. 2.93% last Friday.