v USD gains against nearly all major counterparts with financial markets in the red prompting a resurgence in risk aversion; ADP Payrolls falls short of expectations, showing that the economy added 82k less jobs in April than in March;
v EUR comes under pressure as regional PMI fell by more than expected and unemployment ticked higher in Germany;
v JPY breaks above 80 after interventionist rhetoric from policymakers, but remains well supported.
The USD is stronger this morning against nearly all of its major counterparts as risk aversion provides support. The dollar gained for a third-straight day against its European counterparts as the regions debt woes come back into focus. Moreover, investors have flocked to the dollar's relative safety this morning as stocks and commodities begin the day in the red after disappointing jobs data was released. Private payrolls provider, ADP, released its monthly employment change report showing that the private sector added far fewer jobs than expected at +119k versus last month's +201k and the consensus forecast of +170k. One bright spot this morning is a better-than-expected reading of US factory orders, which contracted by 1.5% versus the 1.6% shortfall that was anticipated. After yesterday's surprisingly strong ISM manufacturing report, it's apparent that the sector is weathering the downturn in European demand better than most expected and continues to drive economic growth.
The EUR is back towards the lower end of its recent ranges after more weak data out of the Eurozone. Regional PMI manufacturing fell to 45.9 from 47.7 in the previous reading, marking the ninth-straight month of contraction. Separate reports showed that Eurozone unemployment remained at 10.9%, the highest in 15-years, and German unemployment ticked higher to 6.8%. German PMI data also disappointed at 46.2 versus the anticipated reading of 46.3, suggesting that the region's largest economy may not avoid recession after all. German GDP contracted in Q4, and investors are now expecting that the initial reading of Q1 GDP may show that the economy shrunk for a second straight quarter, thus entering a technical recession. The negative data comes a day before the ECB is set to meet and the common currency has thus come under pressure as investors increase their bets that ECB President Mario Draghi may signal that further rounds of economic stimulus will be needed.
The GBP is mixed this morning, gaining against the EUR while falling against the USD. Sterling posted its biggest gain versus the common currency in more than a week after the release of encouraging British data. PMI construction fell by less than expected, coming in at 55.8 versus the 54.0 that was anticipated. Combined with the negative data out of mainland Europe, the GBP rose to a 22-month best against the EUR, but pulled back from an 8-month high against the USD on broader risk aversion. Investor attention is now on the BoE's next meeting to be held May 9th after BoE Markets Director Paul Fisher told reporters that quantitative easing is still an option that the MPC considers every month.
The JPY remains towards the top of its recent ranges, but has pushed back above 80 on an increase in interventionist rhetoric from Japanese officials. Vice Finance Minister Nakao described the recent yen moves as somewhat rapid and went on to assert that that government will act in a timely, appropriate manner when needed. However, with the break back above 80, immediate action is unlikely.
The Commodity Currencies are all lower this morning on waning risk appetite and on the falling price of raw goods. Oil fell to $105/bbl, gold slipped to $1652/oz, but most notably, the widely used industrial metal, copper, fell nearly 2% to $377/lb on renewed global growth concerns. The CAD is lower this morning on the falling price of oil, Canada's main export, and after the disappointing private payrolls report out of the US, Canada's primary trading partner. Similarly, the MXN pared recent gains on the dimmed outlook for global economic growth and as investors exit riskier positions. The AUD continued its decline after yesterday's larger-than-expected RBA rate cut as investors still expect further easing to come later this year. The NZD was the biggest loser of the group as investors looked for safer assets and after a report showed that prices for New Zealand's commodity exports fell 4.5% in April, the biggest monthly decline since early 2009.
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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.