Dollar is unlikely to have sustainable rebound against the euro, even in case of solid gains in the key economic data such as non-farm payrolls and unemployment rate which are due to be released today. Euro and Sterling continue to get support from rate hike expectations.
Markets anticipate non-farm payroll to increase by 183,000 in February and unemployment rate to rise slightly to 9.1 percent from 9 percent in January. On Thursday, the US Labor Department reported that initial jobless claims last week fell to the lowest level since May 2008, indicating a strengthening labor market in the nation. Also, ADP reported that private sector employment increased by 217,000 in February, posting a gain for a fifth straight month. Factory orders are due to be released today, with markets expecting a 2.1 percent increase in the orders.
On Friday, the euro rose to a fresh 4-month high of $1.3977 against the dollar on expectations that the European Central Bank (ECB) may raise rates next month. Also, strong employment data is expected to boost risks sentiment with S&P 500 likely hitting recent high of 1344, which is also likely to support Aussie and Loonie. However, Yen and Swiss Franc are likely to feel some pressure, in case of any retreat in risk aversion.
Meanwhile, euro remains firm across the board on expectations of rate hike from the ECB in April, following Trichet's hawkish comments in yesterday’s press conference. Economists had expected ECB to keep that rate unchanged until last quarter of this year. Inflation in the eurozone rose from 2.3 percent in January to 2.4 percent in February year-on-year, staying above the above the ECB's target of slightly below two percent for the third consecutive month. The rate hike expectations will continue to support the common currency against the dollar.
A Reuters’ poll expects ECB to raise interest rate by 25bps to 1.25 percent during its next meeting on April 7. Also, Euro is expected to extend rebound against the Sterling. On Friday, euro reached 4-week high of 85.92 pence against the Sterling, boosted by increased chances of near term rate rise. It rose as high as 85.97 pence, it’s highest since January 31, 2011.