Expectations for further US economic recovery brought back strength to the Dollar as reports could show jobless claims declined and consumer confidence improved, boosting demand for assets in US. The Dollar gained against all the major currencies after Fed's Lockhart said that an increase in bond yields indicates growing confidence in the US recovery will gain strength. USDJPY traded to a high of 82.60, near the highest in two-weeks, EURUSD traded at 1.3687 after previous high of 1.3736, AUDUSD moved lower to 1.0062 as full-time employment declined even as overall jobs additions were positive, GBPUSD traded at high of 1.6112 ahead of today's BOE interest rate decision, USDCHF traded at a high of 0.9603 ahead of Swiss inflation reports.
Asian stocks declined for a second day on concerns that rising Chinese interest rates and unemployment in the US could hamper the global economic recovery as the MSCI Asia Pacific index dropped 0.7%, Nikkei dropped 0.1%, and Hang Seng dropped 0.9% while the Shanghai Composite rose 1.3%. Emerging nation stocks too declined on rising inflation concerns and earnings reports missed estimates and as the Bank of Korea is estimated to increase interest rates by 0.25% to 3% tomorrow.
Yesterday, Fed President Bernanke said that the unemployment is likely to remain high for some time even as reports might suggest claims declined and gave little on his outlook for the economy or public policy keeping his stance unchanged from his last speech. He also said that even as unemployment and consumer spending has been improving giving some optimism, it may take several years before the unemployment rate comes down to normal levels and until that period, the Fed cannot consider the recovery to be fully established which led to Dollar weakness across markets.
Australian unemployment remained unchanged at 5% and 24,000 jobs were added (exp. 17,500) but the currency declined as full-time jobs additions declined 8,000 and any interest rate hikes could be expected in Q3 2011. Japanese machinery orders rose for the first time in four months by 1.7% (prev. -3%, exp. 5%) indicating that companies will increase spending to meet demand from abroad and producer prices rose 1.6% (exp. 1.4%).
Today's calendar consists Swiss inflation report, ECB publishing its monthly report, UK industrial and manufacturing production and releasing the all important BOE interest rate decision which though expected to remain unchanged, could give an insight to future rate hike speculations, US releasing jobless claims, wholesale inventory reports and Fed's Lockhart will speak on Debt and Fiscal Policy measures.