v US nonfarm payrolls fall short of expectations at 115k, but unemployment rate ticks lower to 8.1%;
v EUR falls back towards the bottom of its recent ranges ahead of key elections in France, Greece, Italy and Germany that threaten to dramatically alter Europe's political landscape and undermine stability;
v JPY breaks back below 80 against the USD with stocks and commodities in the red prompting investors to seek the yen's relative safety.
The USD is headed into the weekend higher against nearly all of its major counterparts as investors seek the dollar's relative safety. The USD is deriving support from a disappointing reading of nonfarm payrolls, which fell to 115k versus last month's upwardly revised reading of 154k. The results came in far short of the consensus forecast of 160k, but the mixture of job creation, albeit frustratingly slow, and the lower number of overall labor market participants were enough to push unemployment rate lower to 8.1%. While job creation continues to lag expectations, the relatively steady improvement makes it unlikely that the Fed will be compelled to act in the near term. As such, the resulting drag on both stocks and equities is translating into support for the dollar as it remains the default safe-haven asset.
The EUR slipped back towards the bottom of its recent ranges as Europe's political landscape is set to change. Key elections in France, Greece, Italy and Germany slated for this weekend may test the tenuous alliance European policymakers have brokered to keep the region's member nations afloat. In Greece, nearly a dozen parties are set to win seats in parliament, making an effective coalition government highly unlikely. In France, voters are likely to install a Socialist president for the first time since the early 80's. At the other end of the spectrum, local elections in Germany may weaken Chancellor Merkel's ability to act as creditor for needy Eurozone nations. While the common currency has remained largely within its relatively narrow ranges as of late, political instability may undermine that calm, allowing the downside risks to prevail in the near term.
The GBP is yet again mixed this morning, gaining against the EUR while falling for a fifth straight day against the USD. Sterling is set for a third weekly gain against its Eurozone counterpart as investors seek the relative safety of British assets ahead of a weekend filled with contentious elections on the mainland. However, with a report showing that British home prices fell 2.4%, more than reversing the 2.2% gain posted in the previous month, the GBP's safe-haven allure pales in comparison to that of the USD or JPY.
The JPY continued to trade in a rather narrow, but highly volatile, overnight range with Japanese markets remaining closed for the Golden Week holiday. The yen broke back below the key 80.00 handle against the USD for the first time in three days as the disappointing nonfarm payrolls report out of the US and the upcoming European elections weigh on investor risk appetite.
The Commodity Currencies are set to end the week lower against the major counterparts as weak economic data and political uncertainty prompts investors to shed riskier assets. Raw goods are again in the red this morning with oil tumbling back below the key $100 mark to $98/bbl, gold slipping to $1637/oz and copper extending its weekly decline to $370/lb. The CAD came under pressure early on the falling price of oil, Canada's main export, and the losses were further extended after the disappointing nonfarm payrolls report out of the US, the main destination for Canadian exports. Similarly, the MXN weakened by more than half of a percent against the USD as slower employment gains in the US will likely translate into a drop in demand for Mexican exports. The AUD and NZD extended their recent declines with the AUD heading for its biggest weekly drop against the USD so far this year on increased bets that the RBA will lower interest rates further.
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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.