The US dollar is mixed against a basket of currencies after positive economic news from the US. The Labor Department reported unemployment benefits fell last week to their lowest level in more than 2 ½ years to a seasonally adjusted 368,000, better than the 398,000 forecasted by economists. This is the second week unemployment claims have held below the 400,000 threshold. Claims below this threshold are widely viewed as signaling strong jobs growth, which will ultimately reflect in the payroll numbers. Data from the Institute for Supply Management said its index of national non-manufacturing activity rose to 59.7 from 59.4 in January, slightly better than the forecasted 59.5.
The euro continues to rally against the dollar and broke above its 200-week moving average, suggesting more upside. The levels seen overnight were the highest since November 8 and are on track to test the psychologically important $1.40 level. Though interest rates were left unchanged at a record low 1.0%, European Central Bank President Jean-Claude Trichet said the ECB may raise interest rates as early as next month. These rates hikes are far earlier than markets expected, though any rise would not signal the start of a series of increases. On the economic data front, the Markit Eurozone Services Purchasing Managers' Index rose to 56.8 in February from 55.9 the previous month and European Union statistics reported retail sales rose 0.4% in January driven by a strong performance in Germany.
Sterling retreated from a 13-month high against the dollar and tumbled against the euro after a weaker-than-expected survey of the UK services industry, which prompted some investors to pare back expectations of an interest rate rise in June. Markits / CIPS services PMI fell to 52.6 in February from an eight-month high of 54.4, far lower than the 53.5 forecasted.
The Japanese yen gave back some of its recent gains against the dollar after positive initial jobless claims data from the US.
The commodity currencies remain little changed vs. the US dollar as oil prices remain firmly above $100 a barrel, and gold prices softened after ECB President Trichet's comments. With no major economic news expected out of Canada, watch the loonie to track global sentiment, general risk aversion and oil prices. Though the New Zealand dollar remained little changed against the US dollar, watch the kiwi to come under pressure as market players priced in a 25 basis point rate cut by the Reserve Bank of New Zealand at its next meeting on March 10.
Indications of Overnight rates:
10-Year Treasury Note Yield: 3.561%
Dow Jones Industrial Average: 12,234.63 + 167.68
This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.