• ADP report shows disappointing job growth – markets await U.S. non-farm payrolls data on Friday
  • Markets await Central Bank meeting outcomes on Thursday
  • Canadian dollar holds near 6-week highs


USD – The US dollar weakened across the board this morning following the release of ADP’s private sector job report which showed the U.S. private sector created fewer jobs than expected last month, raising concerns that recovery in the world's largest economy has stalled.  The weaker-than expected national employment report followed soft U.S. manufacturing data released yesterday, which suggested that the economy, on fire the last few weeks due to a run of strong data, has lost some momentum.  The ADP reported an increase of 158,000 jobs, much lower than the consensus forecast of 200,000.  Today’s data has tarnished recent optimism surrounding the U.S. recovery and the overall improvement in labor markets, though analysts are willing to suspend judgment until Friday's U.S. non-farm payrolls report is released.  In the meantime, investors will remain focused on the outcomes of central bank meetings in the U.K., euro zone and Japan for the remainder of the week.  

EUR – Europe's common currency looked vulnerable given a recent run of weak euro zone data that, when added to political turmoil in Italy and concerns over Cyprus, could lead European Central Bank President Mario Draghi to strike a dovish tone hours in his post-meeting comments on Thursday.  Business surveys released today showed manufacturing across the euro zone fell deeper into decline in March, keeping the euro under pressure, near four month lows.  Still, the ECB is widely expected to keep its main interest rate unchanged at record lows when it holds its policy meeting on Thursday.  Investors were also cautious before Thursday's ECB meeting. Although interest rates are expected to be left on hold, analysts saw a small chance of a cut.

GBP – Sterling hovered near a two-week low against the USD, vulnerable to concerns about the risk of the UK falling into its third recession in less than five years and the prospect of more monetary easing. Additional losses could see the pound target the $1.5000 levels, any drop could be limited, with trading range bound until the release of first quarter gross domestic product data later this month.  Many foreign exchange strategists believe that sterling, which rose last year on safe-haven flows from investors looking for shelter from riskier euro zone assets, will not attract such flows this year even on renewed fears over the debt crisis. 

JPY –  The Japanese yen held close to a one-month high against the US dollar ahead of the BoJ’s two-day policy meeting ending on Thursday, at which it is widely expected to boost its bond buying and extend the maturities of its bond purchases.  Some investors who sold the yen in anticipation of bold stimulus measures are worried that the BoJ’s push for aggressive easing may fall short in its first review.  Analysts say significant shifts in the currency pair are unlikely until then.  It is unlikely that traders will push the yen lower, outside of its current trading range near the 92 level until after the BoJ meeting.

Commodity Currencies – The Australian and New Zealand dollars continued their strengthening trend ahead of central bank policy meetings that were likely to reinforce the diverging outlook for interest rates between the antipodean currencies and their global trading partners.  The Canadian dollar strengthened to fresh 6-month highs as weaker-than-expected U.S. employment data sapped U.S. dollar strength.

For more market reports go to Union Bank of California