v USD is stronger as safe haven trades dominate FX flow
v EUR weakens as concerns mount over Spanish debt
v Commodity Currencies are pressured due to lower crude and copper prices
The USD is broadly stronger as safe haven flows dominate the market with concerns mounting over Spain's debt issues. Also supporting the greenback was a broad drop in commodities. Analysts will look towards tomorrow's initial jobless claims where expectations are for a reading of 370,000 claims, slightly lower than last week's reading of 380,000. Analysts will also look towards the Philadelphia Fed. manufacturing survey which is set to release tomorrow with expectations of a reading of 12.0 from a previous reading of 12.5. Look for the greenback to continue to hold onto its gains and strengthen further as the risk on sentiment with the renewed concern over the European debt crisis comes back into focus.
The EUR fell against the dollar as Spanish stocks tumbled. Furthermore, negative sentiment over budget issues plagued Spain, which included data showing a spike in bad loans, rising to their highest level since 1994. Analysts will look towards the Spanish bond auction results tomorrow for further direction into the EUR/USD currency pair. If the resulting auction presents low demand with much higher yields, the euro could break below 1.30.
The GBP rose 0.4% after the release of strong employment figures. Also supporting the pound is a move away from the dovish tone we've seen in the past from the BOE as policymakers note that there is an increased risk for inflation and stated that there is a slower pace of decline than originally anticipated. The release of minutes from BOE's last meeting even showed that one member Adam Posen voted for no change to their quantitative easing program. The market will look towards the April 25th GDP release for further direction in regards to sterling.
The JPY fell close to 0.7% after BOJ policymakers intervened in the market verbally, reiterating the call for powerful easing in order to achieve its recently announced inflation target. Look for Japan to continue to intervene in the market as they try to cap any further appreciation in the yen. The BOJ will meet on April 27 to make its next policy decision, where the outlook remains for further asset purchases.
The Commodity Currencies pushed lower today across the board with oil down from the $104 level touching $102 a barrel and copper briefly dipping below $8,000 before paring its losses. The Canadian dollar managed to hold closest to recent ranges after the Bank of Canada raised its economic growth forecasts for the first three quarters of 2012. As an interest rate hike from the Bank of Canada looks more and more likely in coming months, look for the loonie to hold onto its recent gains and continue to strengthen. The Australian dollar weakened close to 0.2% coming off of the overnight market. Analysts will look towards next week's CPI release, where expectations are for a decline to 2.2% from 3.1% last quarter. The data will further cement a possible rate cut from 4.25% to 4.00% at RBA's next meeting on May 1.
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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.