• U.S. jobless claims data better than expected
• Euro rises on better-than-expected euro zone PMI
• Sterling eases to near 5-month low versus US dollar
USD- The US dollar rose against most major currencies after the latest U.S. jobless claims data came in better than expected, falling to a five-year low. Applications for unemployment insurance payments decreased by 5,000 to 330,000 in the week ended Jan. 19. In addition, the index of US leading indicators rose in December by the most in three months, showing the world’s largest economy is poised to keep growing in the first half of this year. The two-week improvement in initial claims is not yet a trend; however it may reflect a better, less partisan atmosphere in Washington with the lack of drama over the debt limit increase and employers more willing to plan for the future.
EUR- The euro rose against the US dollar and yen after economic data from Germany and the broader region indicated the worst of the euro zone debt crisis may have passed. The European currency traded mixed after private sector activity data highlighted the diverging fortunes of the bloc's biggest economies, with weak performance in France balanced out by numbers out of Germany showing its flash private sector expanded at the fastest rate in a year. Markit's Flash Composite Eurozone Purchasing Managers' Index, which surveys around 5,000 firms and is seen as a good growth indicator, jumped to 48.2 from December's 47.2, smashing expectations for a rise to 47.5. While the index has now held below the 50 mark that separates growth from contraction in all but one of the last 17 months, Markit said the data suggested conditions in the bloc were improving. In France, the downturn deepened, however, with its composite index falling to its lowest level since March 2009, when the euro zone was deep in recession. The euro dipped on the French numbers and was up on the German data. Overall, there is positive sentiment for the euro.
GBP- Sterling fell to a a five-month low versus the US dollar and a 11-month low against the euro as investors position for GDP data on Friday that is likely to show the UK economy shrank in the final quarter of 2012. Some strategists said Prime Minister David Cameron's promise to hold a referendum on Britain's membership of the European Union had also tainted longer-term sentiment towards sterling by planting uncertainty among investors. With the UK economy showing signs of struggling, weak GDP data on Friday could fuel speculation the Bank of England may opt for more monetary easing in coming months, even though minutes from the January meeting showed some policymakers had doubts about the need for it.
JPY- The Japanese yen fell for the first time in four days versus the US dollar after Deputy Economy Minister Yasutoshi Nishimura said its decline isn’t over and a level of 100 versus the US dollar wouldn’t be a concern. The Japanese currency slid against all of its 16 most-traded peers after a Chinese report showed manufacturing expanded at the fastest in two years, reducing demand for the yen as a refuge. The yen is being pushed lower mainly as a result of the Chinese data which surprised to the upside and as the global backdrop is showing an improving trend that’s not factored into the market yet.
Commodity Currencies- The Australian dollar lost ground against the US dollar as a failure to rally on upbeat Chinese data led investors to cut back on long positions, however the New Zealand dollar was able to maintain its ground. The Aussie got only a brief lift from the latest HSBC survey of China's factory sector which showed growth accelerated to a two-year high in January. China is a major export market from Australia and New Zealand and a pick up there would be supportive of earnings and commodity prices in general. In contrast, the kiwi was not far from a high of $0.8462 touched earlier this month and should remain strong. The Canadian dollar fell to an almost 10-week low versus the US dollar as the Bank of Canada’s reduced growth forecast and less emphasis on raising interest rates weighed on investor optimism on the economy. The Canadian currency traded below parity for a second day after the central bank cut its forecast for growth this year to 2 percent from an October forecast of 2.3 percent.
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