US dollar climbs on anticipation of positive US employment data

US Dollar:

The dollar rose against all its major counterparts on prospects jobs data will signal a continued re-covery in the worlds largest economy amid signs growth in Asia is slowing. The weakness in the US dollar will reverse very quickly as the market focuses on more economic growth. We saw the greenback rise to $1.3823 against the single currency from $1.3909 yesterday, after earlier touching $1.3805, the strongest since March 2nd. The dollar index, which tracks the greenback against the currencies of six major trading partners, rose to 77.084 today, compared with the four month low of 76.124 on March 7th. Data to watch out for today comes in the form of unemployment numbers which are expected to come in at 375k, as well as the US Trade balance.
Data 13.30: Trade balance –41.4B from –40.6B & Unemployment Claims 375k from 368k.

Pound:

Sterling has started the trading day off mixed as we see gains made over the euro but a slide against a rallying US dollar. Players are waiting on the sidelines in anticipation of a potential interest rate rise by the Bank of England today which will be closely monitored by the markets, but it was the downgrade of Spain by Moody’s which dragged down the single currency, pushing GBP/EUR up by over half a cent. We saw the pound trade just over the 1.16 handle yesterday and has now tested the 1.17 level this morning. If we see a possible interest rate rise by the BoE today, which is against most analysts predictions, then we would expect more sterling strength. As we turn our focus on cable, we see the pound has not faired so well as the greenback has rallied against most major currencies in early morning trade. Markets are expecting the jobs numbers from the US to confirm the worlds largest economy is on the road to recovery which has given the buck a boost. Yesterday we saw cable trading overt the $1.62 handle but we have seen GBP/USD fall to $1.6124 this morning. Looking ahead to today, the BoE Governor Mervyn King may find it hard to justify holding interest rates at a record low as UK inflation accelerates to worrying levels. King, who chairs a meeting of the nine-member MPC in London today, resisted a move by three officials last month to raise their benchmark interest rate. Markets expect they will leave the rate at 0.5% for a 25th month, according to all 61 economists in a Bloomberg news survey. Data 09.30: Manufacturing Production m/m 0.8% from –0.1%. 12.00: BoE Interest Rate expected to remain at 0.50% & Asset Purchase Facility expected to remain at 200B.

Euro:

We have seen euro strength of late, mainly boosted by the ECB President Jean-Claude Trichet saying last week the central bank may raise borrowing costs from a record low after inflation quickened above its limit to 2.4%. A reversal has now been seen this morning after credit rating agency Moody’s downgraded Spain to Aa2 today. This follows Portugal's bond spreads widening to worrying levels over the last few days, piling pres¬sure on the Southern European country closer to accepting a bailout to finance its huge debt levels. The single currency fell to a one week low against the pound as EUR/GBP hit 0.8550 this morning. Against the dollar there was also a decline as EUR/USD gave up just under a cent to hit $1.3804. The fall of the euro comes ahead of a European Union leaders meeting tomorrow on measures to address the region’s debt crises.
Data 09.00: ECB Monthly Bulletin.

General:
• New Zealand’s central bank cut its benchmark interest rate to a record low of 2.5% from 3.0% today, reducing the attractiveness of the nations assets as officials from Beijing to London move to contain infla¬tion by raising borrowing costs. New Zealand's currency has slumped 5.7% so far this year.

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