Forex Major Currencies Outlook (April 4, 2013)

The ADP non-farm employment change, which can be considered as a preview of the NFP release, came in below the expected 203K reading and printed a mere 158K increase in hiring for March. Meanwhile, the ISM non-manufacturing PMI came in at 54.4 instead of the estimated 55.9 figure, showing that the expansion in the industry slowed down more than expected. There are no major releases from the U.S. today but be mindful of speeches from FOMC members Bernanke, Yellen, and George as they could talk about future monetary policy plans.

EUR                  

The euro was able to recover slightly against the U.S. dollar, which suffered a selloff due to weak U.S. data. The only report released from the euro zone yesterday was the CPI flash estimate which came in higher than expected at 1.7%. The ECB rate decision today could be a bigger market mover for euro pairs even though the central bank could still keep rates on hold for the meantime. However, recent uncertainties in the euro zone could result to a less upbeat statement from Governor Draghi, which might weigh on the euro.

GBP

 Despite weaker than expected construction PMI from the U.K., the pound managed to pocket a few gains as GBP/USD pulled up to the 1.5150 area. The construction PMI came in at 47.2 from 46.8, a slight improvement but still lower than the estimated 47.7 reading. With BOE policymakers keeping close tabs on business surveys, the weaker than expected PMIs might warrant a pessimistic statement from the BOE during the interest rate decision today. No monetary policy changes are expected but BOE Governor King could focus on the challenges to the British economy.

CHF 

There were no major reports released from Switzerland during yesterday’s trading but the franc managed to catch some gains as USD/CHF fell from 0.9500 due to weak U.S. economic data. There are no reports due from Switzerland today which suggests that franc pairs could move to the tune of economic data from other economies.

JPY 

The BOJ announced their new quantitative and qualitative easing measures today, triggering a sharp yen selloff. Kuroda mentioned that they will keep implementing these measures until the economy is able to achieve its 2% inflation target. They doubled their monetary base for easing, eliminated the bank note rule, and declared that they plan to achieve their inflation goal within two years. The vote on these aggressive easing measures was close to unanimous, signaling that central bankers are very serious about warding off deflation. Yen selling could continue for the rest of the day as USD/JPY edges close to 94.00.

Commodity Currencies (AUD, NZD, CAD) 

Commodity currencies were unable to sustain their rallies during yesterday’s trading as weak economic data weighed on risk sentiment and dragged higher-yielding currencies lower. AUD/USD fell short of testing the 1.0500 major psychological level while NZD/USD came close to .8450. Australia released stronger than expected building approvals and retail sales data for February during today’s Asian session, confirming that the recent RBA easing efforts are just starting to take effect. No other reports are due from the comdoll economies for the rest of the day as AUD/USD, USD/CAD, and NZD/USD could be swayed by risk sentiment once more.

By Kate Curtis from Trader's Way