It would be tempting fate to suggest that forex markets might be a little calmer today on account of the absence of global traders as the Easter vacation extends. However, a key U.S. report has the potential to exacerbate any movement in what may prove thin trading conditions. The dollar is stronger after Friday's employment report, which showed employers added 162,000 jobs in March. But it's not simply the dollar that strengthened - the broad appetite for risk also stepped up a notch as a result.
U.S. Dollar -Most of Europe remains closed for Easter, which means that upon their return dealers' views will have to assimilate a robust employment report that saw the first jobs gain for the U.S. economy since November and only the second since the economy went into recession. In addition the prospect for the fastest pace of service sector growth is on the cards this morning in the form of the ISM non-manufacturing survey. This sector accounts for 90% of the economy and is a benchmark indicator of the broad health of the economy.
Euro - If you recall, ahead of the official labor market data last week the private ADP report disappointed investors by displaying a picture of ongoing job losses. That served to bolster the euro, which in the day before the NFP rose to almost $1.3600. However, the release of data showing the creation of 162,000 jobs sent the euro from $1.3550 to $1.3475 before it rebounded. This morning the euro is weaker at $1.3466. It's also lost ground to ¥127.20 after the Japanese unit curried favor among exporters after a week of losses.
Aussie dollar - The RBA meets on Tuesday to decide whether to make a fifth rate increase in six meetings. Analysts are evenly divided as to whether the central bank will favor tightening policy sooner rather than later having warned last week that a return to escalating home prices should not be considered the norm nor treat it as an endless get-rich quick scheme. The Aussie continues to benefit from firming risk appetite and remains bolstered by the allure of ever-increasing yields. Today it is trading at 92.01 U.S. cents.
Japanese yen - After a week's worth of slides raised questions over how quickly the U.S. dollar can continue rising, investors bought the yen today leaving the pair trading at ¥94.43. Rumors that exporters suddenly found the unit cheap helped stem the recent fall.
British pound - Investors continue to worry less about the outcome of the forthcoming general election, with speculation mounting that the Prime Minister will announce the election date tomorrow. Several corroborating polls at the weekend indicated a widening in the lead of the opposition Conservative party. Investors are breathing a sigh of relief because if the polls are indeed a good indicator, the political balance of power will be weighted enough to permit decisive action against an ugly public sector deficit. The pound added to $1.5252 while it also rose to 88.28 pence to the euro.
Canadian dollar -Parity between the North American pair is acting like a magnet once again asserting an extraordinary influence over the Canadian dollar, lifting it to within a half cent of equality. The Canadian unit remains close to an intraday peak at 99.50 U.S. cents today.
Senior Market Analyst