Daily Forex Focus – 3 February
European equities ended mostly higher yesterday, led by the Spanish IBEX, up 0.87% even as the shorter-dated bond auction was weaker than previous issuance this year. The German DAX was also stronger, rising 0.59% while the Dutch AEX lost ground, moving down -0.64%. EURCHF is still closing in on the 1.20 level, now at 1.2056, testing the resolve of interim SNB chairman Thomas Jordan to protect the currency peg. EURUSD is trading slightly lower, dropping to 1.3132 as the “imminent” Greek debt swap is yet postponed for further discussion. The Greek situation has been deemed unsustainable as even after another bailout, austerity is having a biting impact on economic growth, including 18% unemployment. Details of the bond swap now include over 70% haircut and 3.6% coupon on 30-year bonds. Finance ministers of Europe’s remaining triple-A rated nations are meeting today to discuss the future while weighing options for Greece.
Asian equities are lower in today’s session, led by the Australian ASX, falling -0.34%. Following close behind is the Nikkei and Hang Seng which are trending down -0.25% and -0.23% respectively. Earnings disappointments and Greek debt uncertainty are the sources of today’s weakness. The Chinese non-manufacturing PMI figures also came in weak, adding further evidence to growth slowing well below double digits this year. In the meantime, China is adding restrictions to foreigner’s mortgages in efforts to stem the tide of foreign investment in the property market. Gold for the moment is over the $1750 level, trading at $1759.40 and looking to test the $1760 level. Copper also rose, trading 0.46% higher in today session to $3.7985.
The New York Stock Exchange recorded volume at levels not seen since 1999 as the Nasdaq and S&P both grind higher, up 0.40% and 0.11% respectively. The Dow Jones was marginally lower, losing -0.09%, as traders position themselves for today’s economic figures. Jobs data yesterday showed a marked improvement as both Initial and Continuing Jobless claims beat expectations. In statements to the Budget Committee, Fed Chairman Bernanke reiterated that he will not trade the inflation goal for employment. Meanwhile, crude continues to slide lower, moving to $96.51. Natural gas has recovered slightly, moving higher as inventories declined, presently trading at 2.543/MMbtu. On deck today we have the nonfarm payroll release and also the unemployment rate, with both figures to be released at 13:30pm GMT.
The euro fell after China released worse than expected Non-Manufacturing PMI figures during the Asian session. After the German Chancellor’s visit to China, Chinese Premier said that China is considering a greater involvement in the EFSF and ESF channels. A successful bond auction from Spain helped the euro after Spanish bond yields fell below 5%. Against the greenback, the single currency fell to 1.3085 and later it rebounded to 1.3186. Versus the Swiss franc, the single currency edged higher today to 1.2060 after the Swiss National Bank Chairman said that the central bank is ready to act in order to defend the cap of 1.20 francs to the euro.
The US dollar appears softer today as the market is expecting the US Non Farm Payrolls data. Investors expect data to show that the US economy created 150 thousand jobs in January down from the previous month’s 200K. The unemployment rate is expected to remain unchanged at 8.5%. Federal Reserve Chairman Ben Bernanke testified before the House Budget Committee yesterday and his dovish tone weighed on the greenback. He said that the economy has shown some signs of improvement but the pace still remains frustrating slow adding more on speculation for a third round of quantitative easing. Versus the Japanese yen, the dollar is still hovering above key levels falling as low as 76.04 and with the US jobs data due later today concerns for an intervention by the Bank of Japan are heightened.
The Australian dollar dropped against the greenback today after poor data from Australia’s largest trade partner, China. Chinese non manufacturing PMI dipped by more than expected in January weighing on demand for riskier assets. The pair rose to 1.0671 from 1.0756 traded yesterday.
Oil prices fell sharply to 95.40 dollars a barrel from 97.95, a decline of 2.6%. Gold edged higher to 1761.00 dollars an ounce from 1741.10. Silver also edged higher to 33.38 dollars an ounce from 33.45.