Forex outlook:
The euro rose against the dollar and the yen on Thursday after European Central Bank President Jean- Claude Trichet indicated the ECB could raise interest rates next month, potentially narrowing the U.S interest rate advantage. The euro gained to $1.2782 from $1.2757. It strengthened to 149.71 yen from 149.33. The dollar was little changed at 117.13 yen. The euro also gained after German Chancellor Angela Merkel's coalition has agreed to cut corporate taxes, Finance Minister Peer Steinbrueck said today, ending months of negotiations over how to stem company profits from moving abroad without straining the budget. An increase in the central bank's benchmark rate, which was left unchanged at Thursday's meeting, would raise the attractiveness of assets denominated in euros. Gains in the common European currency were limited as investors await U.S. nonfarm payrolls data due today which is forecast to show job growth accelerated last month.
There was little investor reaction to U.S. economic reports on Thursday. Factory orders rose than expected, business productivity was flat and unit labor costs rose at a faster-than-forecast pace.
The yen initially declined after Bank of Japan Governor Toshihiko Fukui said in parliament there is no need to “hastily” raise borrowing costs. Finance Minister Koji Omi and Fiscal & Economic Policy Minister Hiroko Ota said central bank monetary policy should bolster the economy. “Rate increases will be made little by little, step by step,” Fukui said.
Gold: Gold extended a rally to a seven-week high as some investors bet a slowing U.S. economy will weaken the dollar, boosting the precious metal's appeal as an alternative investment. Gold futures rose 1.4 percent, to $627.80 an ounce. “The only thing supporting the dollar is Friday's payrolls data,” said John Licata, chief investment strategist at Blue Phoenix Inc. “If we get a weak jobs report, buy gold.”
Crude Oil: Crude oil 1.4 percent to $57.88, the lowest close since Oct, after forecasts for warmer weather in the U.S. and calls by Kuwait for OPEC to pause before cutting production further. “The market is very skeptical about what is happening in OPEC,” said Luis Giusti, a board member of the Centre for Global Energy Studies, and former head of Venezuela's state oil company. “The perception is that from the 1.2 million barrels a day that was agreed by OPEC, only about half a million will come into effect.”
Pool position:
