USD - The dollar was lifted on improving market sentiment following last Friday's positive employment report. The US economy created jobs at the fastest pace in 3 years, adding 162,000 jobs in March. Although the unemployment rate remained steady at 9.7%, the improved pace of private sector hiring provided an upbeat tone to the report. The positive jobs report capped a week of better economic data last week suggesting the economic recovery may finally be gaining traction. Both durable goods and factory orders rose 0.9% and 0.6%, respectively in February while the Manufacturing Purchasing Manager's Index (PMI) rose to 59.6, highlighting the improving conditions in the manufacturing sector. As the economy recovery continues to build, the dollar is likely to remain underpinned as the economy to emerge fastest from the global economic downturn.
EUR - The euro is largely range bound amid holiday trading conditions as Europe is closed today for the Easter holidays. The single currency is trading just below $1.35 as concerns over Greece continue to weigh. Greek Deputy Prime Minister Pangalos said the problems facing his country were likely to spread within the Eurozone with Portugal the next potential victim. His comments while reflecting frustrations with the lack of progress and support for a rescue package for beleaguered Greece also highlight the dilemma facing Eurozone members. Based upon this, pressure on the euro is likely to persist until a solution to Europe's budgetary problems is found.
GBP - The MPC meets this Thursday, again with no change in rates (or the quantitative easing program) expected. On the economic front, the March services PMI will attract attention, though real economic data as of today failed to match the strength of surveys. In fact, markets will be looking to see if February manufacturing output picks up as expected, in line with the PMI for the sector in that month. PPI data, Nationwide consumer confidence, Halifax house prices, and the BCC quarterly manufacturing survey are also on the calendar. In the UK, the record budget deficit of about 12% of gross domestic product has become a flashpoint of the pre-election campaign. PM Gordon Brown may visit Queen Elizabeth II at Buckingham Palace tomorrow to ask the head of state to formally dissolve Parliament for a vote likely to be May 6.
JPY - The Japanese yen fell last week as risk tolerance improved on signs of growth in the U.S. and as concern about Greece eased, reducing the yen as a safe-haven. Talk that Japanese investor demand for foreign currencies will increase, and that Japanese government bonds will widen did not bode well for the yen. Japan's central bank will hold its policy board meeting on April 6-7 and is not expected to take additional easing measures as last Thursday's BOJ Tankan survey showed big manufacturers became the least pessimistic since 2008. BOJ policymakers may even raise their economic outlook as demand from emerging markets boosted exports and production. Expect the yen to remain weak as interest rates remain near zero in Japan.
CAD - The Canadian dollar rallied last week and began the second quarter on a strong note, buoyed by positive risk sentiment and firmer commodity prices. Canada's economy grew 0.6% in January, faster-thanexpected, led by gains in manufacturing, wholesale trade, construction, retail sales, and finance. After a stunning 5% annualized growth in the fourth quarter, most economic data has been surprisingly strong and should continue to support the loonie. Today, the loonie jumped to a 20- month high against the U.S. dollar as crude oil, a key Canadian export, approached $86 a barrel, boosting the appeal of commodity-linked currencies. This week, the market will focus on Friday's Canadian employment report. The April 9 report is expected to show Canadian employers added jobs for a third straight month in March. There is a chance that the loonie may reach parity.
MXN - The peso appreciated throughout the past week as US jobs report as well as an increase in Mexico's budget surplus indicated a rise in exports and continuing regional expansion. US Non-Farm Payroll posted an additional 162k jobs, suggesting a subsequent increase in demand for Mexico's exports. Meanwhile, Mexico's Budget Balance in February indicated a budget surplus of 22.9 billion pesos ($1.85 billion), vs. the previous 6.37 billion ($0.52 billion), pushing the peso to the strongest level since October 2008. The peso appreciated 1.82% against the greenback last week and is expected to continue strengthening in the near term.
AUD - Australia was on holiday today, which left AUD in a fairly tight range. It is a close call as to whether or not the Royal Bank of Australia will hike rates for the second consecutive month. The RBA will announce its interest rate decision early in the upcoming Asian session (12:30am ET) and there is widespread debate as to whether the central bank will use this opportunity to increase interest rates to 4.25% or leave them at 4.0% in response to recent strong economic data. The decision will provide a knee-jerk reaction to AUD, however, whether the increase comes today or at the May 4th meeting, interest rates are still moving higher in Australia, but the RBA is also farther along in its hiking cycle.