The U.S. Dollar traded mixed against its peers as official news confirmed that the European Central Bank will proceed with its bond-purchasing program. However, the greenback declined against high-yield currencies in anticipation of today’s Non-Farm Payroll reports which are forecast to show that the employment sector slowed down in August. This supports the case for further easing by the Federal Reserve. According to yesterday’s data, the number of people filing for Unemployment Benefits dropped from 377,000 to 365,000 last week; and the ADP Firm revealed that Non-Farm Payrolls advanced by 201,000 in August. Some economists believe that the better than anticipated releases will dampen the possibility the central bank will implement another round of stimulus. Meanwhile, in Canada, the Dollar rallied versus the greenback as economic reports suggested that job growth is picking up again in North America. The Loonie remained strong as the European Central Bank announced that it would go ahead with its bond-purchasing plan while crude oil futures rose 2.5 percent in the early part of the day.
The Euro rallied to a two-month high against the Yen and climbed versus the U.S. Dollar after the ECB President, Mario Draghi, offered complete details on the bank’s bond-purchasing program. The plan has been dubbed the Outright Monetary Transaction program, and its aim is to help stabilize the debt markets. The European Central Bank also released its outlook on growth for this year, predicting that the economy will contract 0.6 percent for 2012. The bank left the benchmark interest rate unchanged at 0.75 percent. The British Pound remained unchanged against the U.S. Dollar subsequent to the ECB announcement regarding its new bond-purchasing plan. However, the Sterling gained against the Euro as the Bank of England maintained the costs of borrowing money at 0.5 percent and left asset purchases at 375 billion GBP.
The Yen slipped to a two-week low versus the U.S. Dollar after the release of positive economic data out of the U.S. and following statements by ECB President Draghi describing a new bond-purchasing program. Meanwhile, the Bank of Japan’s Governor, Masaaki Shirakawa commented that the overvalued Yen has hurt the country’s exports and recommended that the bank monitor any advances more carefully.
In the South Pacific, the Australian Dollar climbed subsequent to the release of better than expected Unemployment figures. The Australian and New Zealand Dollars rallied versus most of their peers in anticipation of the ECB policy meeting. Also, both currencies were buoyed by the hope that any new measures will help the troubled Euro region.
EUR/USD- ECB Will Move Ahead With Plan
The Euro strengthened against the U.S. Dollar after ECB President Draghi announced that the bank would move ahead with its plan to purchase bonds in order to lower the borrowing costs in the region’s most indebted countries. Analysts believe that the chance for Spain to become the next Greece is lower, especially with the plan in place. Mr. Draghi indicated that the central bank will opt for short-term bonds with up to three-year maturities. He explained that the purchases will be “sterilized” suggesting that the impact on money supply will be limited.
GBP/USD- BOE Makes No Changes
The British Pound traded in tandem with the Euro against the U.S. Dollar following positive economic reports out of the U.S. which reduced the possibility for further stimulus by the Federal Reserve; the Sterling was also supported by news that the European Central Bank will buy government bonds in order to stabilize the debt markets. In the meantime, the Bank of England announced it was leaving the benchmark interest rate at 0.50 percent and would not augment its asset-buying program.
USD/CAD- Loonie Rallies On Job Growth
The Canadian Dollar rose to more than a four-month high against its American counterpart on data which showed that U.S. Unemployment Claims dropped by 12,000 to 365,000 in the week which finalized on September 1st. And although there are signs that job growth has slowed down, economists believe this may dampen further action by the Federal Reserve for now. The Loonie was also supported by a hike in raw materials prompted by the anticipation of further monetary easing by the European Central Bank. In an announcement the day before yesterday, the Bank of Canada indicated it would not raise the benchmark interest rate at this time. Meanwhile, Fitch Ratings reaffirmed the nation’s AAA sovereign debt rating.
AUD/USD- Aussie Snaps Declines
The Australian Dollar rose after it fell for three consecutive days, following reports which showed that the country’s Unemployment Rate dipped from 5.2 in July to 5.1 percent in August. Other data indicated that the number of people with jobs dropped by 8,800 in August after they went up by 11,700 in July.
Today’s economic calendar shows that Switzerland will report on the Unemployment Rate. The U.K. will release data on PPI Input and Output, Industrial Production, Inflation Expectations and Manufacturing Production. The U.S. will announce the Unemployment Rate, Average Weekly Hours, Private Non-Farm Payrolls, Non-Farm Payrolls and Average Hourly Earnings. Canada will publish Changes in Employment, Building Permits, the Ivey PMI and Labor Productivity. In Canada, the Governor of the Bank of Canada, Mark Carney, is scheduled to speak.