- Weak UK jobs data softens GBP
- Euro retreats from 7-week high vs. USD
- G20 meeting seen unlikely to criticize BOJ policy
USD – With markets awaiting the start of the G20 meeting in Washington tomorrow and with the limited amount of new economic data in the US to trade on, markets are watching the equity and commodity markets for direction. As such, analysts say losses in stocks and commodities today have boosted demand for the safe-haven US currency. The dollar may garner additional strength if investors seek the safety of US bond markets as the outlook for the global economy dims.
EUR – The euro slid from a seven-week high against the dollar, tracking losses in European shares. Traders cited media reports which state a former European Central Bank board member, Lorenzo Bini Smaghi, expressed concerns about the euro's gains. Some analysts say this could reflect Eurozone policymakers' growing concern about the region's weak economic growth. Demand for euro assets from Japan may still offer underlying support for the single currency to test the EUR/USD 1.3270/1.33 levels.
GBP – Sterling remained range bound versus the dollar, and was knocked to a one-month low against the euro, after data showed weak earnings growth and a rise in Britain's unemployment rate which added to concerns about the fragile economic outlook. Economists say it remains a close call whether first quarter growth data next week will show the British economy sliding back into recession and the uncertainty has weighed on demand for the pound. Investors will next focus on retail sales data on Thursday to help gauge domestic demand in an economy teetering on the brink of its third recession in less than five years. Markets are also wary of buying sterling before the release of the initial official estimate of UK first quarter gross domestic product data releasing on April 25.
JPY – The Japanese yen weakened for a second straight day against the dollar and euro on expectations that major developed and emerging economies will not voice strong concern at the upcoming G20 meeting, over Japan's aggressive monetary easing that has triggered a sharp slide in its currency. Although it remained below the four-year high of 99.94 yen set last week, the dollar has gained 5 percent since Japan's aggressive easing action early this month and has climbed 13 percent so far this year. Many analysts believe that the abundance of global liquidity due to monetary easing in Japan and the United States will also lead to further weakness in the yen as Japanese domestic investors look for opportunities to buy oversea-assets with better returns.
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Commodity Currencies –The Canadian dollar fell to near one-month lows against the USD ahead of a Bank of Canada policy rate meeting where it could temper the prospects of future tightening. The Bank of Canada is universally expected to keep interest rates on hold and many also expect it to acknowledge the weakness seen in Canadian data during the first quarter. The Australian and New Zealand dollars remain quite a distance from near record highs breached last week. The New Zealand dollar was pressured lower after a restrained reading of consumer prices disappointed some investors who were positioned for a rate hike later this year. The Reserve Bank of New Zealand said it expected to keep rates on hold this year at a record low, though it issued a stark warning earlier this month about a possible rate hike should housing prices continue to rise. Helping cap losses in the kiwi was another rise in global prices of dairy, New Zealand's top export earner. Prices jumped to their highest levels in nearly five years.