Daily Report: US Dollar Plunges In Anticipation of Jobs Report

The U.S. Dollar plunged against most of the majors as investors shied away from the greenback in anticipation of today’s Non-Farm Payroll reports, and as the market remains uncertain on whether the Federal Reserve will scale back on its monthly asset purchases. On the data front, the Labor Department reported that the number of people who filed for Unemployment benefits last week dropped by 11,000 to 346,000 while economists had anticipated a decline of 12,000. Furthermore, Unemployment Claims for the previous week were revised up to 357,000. Gold prices climbed after the European Central Bank indicated it will leave the benchmark interest rates unchanged and suggested the region’s economy will expand more than predicted in 2014. Comments by the European Central Bank’s President, Mario Draghi, bolstered the Euro’s value and prompted the greenback to weaken, a factor that boosted the price of the precious metal. Gold Futures for August delivery rose 1.20 percent and settled at $1,415.35 a troy ounce on the Comex Division of the New York Mercantile Exchange.

The Euro rallied after the European Central Bank decided to leave the interest rates at 0.50% and as Central Bank President Draghi issued positive statements which pushed the currency close to a four-week high. However, Mr. Draghi did not rule out the likelihood the bank may opt for negative deposit rates and stated that this option is being extensively discussed. Investors anticipate that the optimistic tone of the speech may be indicative of the fact that the ECB will refrain from expanding stimulus. The British Pound climbed the most since October of 2009 versus the U.S. Dollar after the Bank of England announced it won’t engage in additional easing as the economy has shown signs of improvement. The Sterling advanced against the majority of its counterparts after economic releases confirmed that House Prices went up for a fourth month in May.

The Yen gained the most in more than 12 months versus the greenback and traded at a seven-week high as market investors reduced speculation on a weaker Japanese monetary unit following statements by Prime Minister Shinzo Abe. The Yen had begun to appreciate after the Prime Minister failed to offer details on further stimulus measures.

Lastly, in the South Pacific, Australia’s Dollar tumbled to the lowest price since 2011 as the country’s interest-rate differential contracted, dampening the appeal of the currency. The Aussie remained under pressure as investors predict the Reserve Bank may cut the costs of borrowing money by 41 basis points within the next year. New Zealand’s Dollar reached close to 11-month lows, despite the fact that demand for the U.S. currency was down in anticipation of today’s Non-Farm Payroll reports and a decision by the Federal Reserve on further asset purchases.

EUR/USD- ECB Leaves Rates At 0.50%
The Euro surged to three-month highs against the U.S. Dollar as the region’s central bank announced its decision to leave the benchmark interest rate at 0.5 percent. The shared currency benefitted further from comments by European Central Bank President Draghi in which he indicated that the E.U.’s economy is expected to contract 0.6 percent this year, but added that the region is forecast to expand 1.1 percent in 2014, rather than the previously predicted 1.0 percent. Today, Germany will issue data on Industrial Production and the Trade Balance.

GBP/USD- Pound Rallies Most Since 2009
Britain’s Pound advanced the most in 4 years against the greenback after the Bank of England indicated it won’t expand the current asset purchasing program. The BOE kept the target for asset purchases at 375 billion Pounds; and policy makers held the country’s interest rate at 0.5 percent. In addition, Halifax, the Mortgage division of Lloyd’s Banking Group Plc stated that Home Prices climbed 0.4 percent last month to an average of 166,898 Pounds. Homes in the U.K. have reached their highest value since August of 2010.

AUD/USD-Aussie Plunges Most Since 2011
Australia’s Dollar plummeted to the lowest since 2011 as the nation’s interest rate advantage shrunk, ebbing the currency’s appeal. The Aussie was also weighed down by a drop in Asian stocks, and a dip in demand for risk currencies. The South Pacific currency fell further, reaching 20-month lows after domestic data indicated that the nation’s Trade Surplus contracted more than anticipated. According to official figures, the Trade Surplus went from AUD0.56 billion to AUD0.03 billion in April. The figures were issued one day after Australia reported that Gross Domestic Product increased 2.5 percent in the initial quarter of 2013, denoting it grew at the slowest rate in 24 months.

USD/JPY- Yen Touches Seven-Week Highs
The currency markets were quite volatile as the President of the European Central Bank held a press conference. Meanwhile, the Nikkei dropped another 0.85 percent which means it has now declined close to 20 percent from its highs. But this didn’t prevent the Yen from surging against the U.S. Dollar, or from rallying the most in 3 years. This took place a day after the country’s Prime Minister, Shinzo Abe indicated the legislature is working on loosening rules for businesses; however, he failed to offer clues on whether the central bank will expand stimulus. At this time, investors anticipate the Yen won’t weaken further, especially since the Bank of Japan has not signaled it will engage in additional easing.

Today’s Outlook
Today’s economic calendar shows that the U.K. will report on the Trade Balance and Inflation Expectations. Japan will issue the Leading Index. The U.S. will announce Non-Farm Payrolls, Private Non-Farm Payrolls, Unemployment Rate, Average Weekly Hours and Average Hourly Earnings. Lastly, China will publish the Trade Balance.