Dollar falls ahead of NFPs

USD

The dollar fell on Thursday after investors offloaded their positions on the eve of Non-Farm Payrolls data out on Friday, after expectations soured that the figure would be good enough to lead to the Fed tapering their QE. It may be investors hoping the Fed would change their policy and this might lead to higher yields fled the greenback after their hopes of an exit faded. Nevertheless, on the data front Initial Jobless Claims (Jun 1) fell – although not as much as expected, showing a 346k print – which though better than the 356k previously - was not as low as the 345k expected. Continuing Claims (May 25) fell to 2952k from 2986k when a less sharp fall to 2973k had been expected. Challenger Job Cuts meanwhile fell by -41.2% in May from -6.0% previously. Other data showed that the Consumer Outlook Index in June fell stood at 51.8 from 50.2 previously. Household Change in Net Worth rose to 3003bn from 1174bn previously.


EUR

The euro rose on Thursday after the ECB held back from lowering interest rates or reducing the deposit rate to below zero as had been speculated by some after recent poor data showed a complete lack of growth in the region. Mario Draghi was upbeat in his commentary about the outlook for the euro-zone even though the ECB actually revised down their forecasts for growth from -0.5% in 2013 to -0.6% (although 2014 forecast was revised up a basis point to 1.1%) - nevertheless the results of the meeting were broadly interpreted as positive. On the data front French Unemployment rose to 10.8 from 10.5 as had been expected. German Factory Orders fell by -0.4% y/y in April from -0.3%, which surprised investors as it had been expected to rise to 0.9%; m/m they fell by an acute -2.3% from 2.3% when expectations had been for a less steep -1.0% drop.


GBP

The pound rose strongly on Thursday after the BOE rate meeting at which policy-makers left policy unchanged, neither reducing interest rates nor increasing asset purchases. Whilst there had not been that high an expectation they would do something the result nevertheless helped propel the pound higher. The recent improvement in data, particularly this week's PMI metrics, which compared favourably to the weaker euro-zone PMI's released at the same time helped lessen expectations the BOE would increase QE, however, there remains a lingering doubt. Sir Mervyn King's view that without QE bank's cannot sufficiently recapitalize to kick-start lending and the economy was one reason for continued expectations of stimulus. It is not known how he voted in this – his last meeting – as the minutes will not be released until later in the month. On the data front leading mortgage lender Halifax showed House Prices rose by 2.6% in May (3mo/3mo) from 2.0% previously and 0.4% m/m when only a 0.2% rise had been expected. New Car Registrations rose 11.0% in May versus 14.8% in the previous year and Lloyds Employment Confidence fell by -37 from -41 previously.


JPY

The yen rose – spiked up rather - on Thursday after traders aggressively sold the dollar ahead of Non-Farm Payroll data out on Friday. Previous expectations that the figures might be good enough to encourage the Fed to taper its monthly asset purchases changed on the eve of the big release and concerns the data would be poor weighed on the dollar and helped support the yen which spiked higher. The Japanese currency also rose against the euro and the pound despite those currencies enjoying relatively good central bank meetings. On reason could be the yen is enjoying flows from dollar investors who had bet on the Fed tapering QE and that that would lead to higher yields. It is possible recent data showing Japan's deflationary trend reversing and Abenomic policies starting to work could now be translating into a stronger yen too.