Currency Traders Sit Tight Ahead Of The Non Farm Report

The Australian and New Zealand dollar eased in the morning session as the US dollar recovered some of its significant losses over the past few days. The Aussie is down 14 points after retail sales missed exceptions in the morning and the kiwi fell 30 points as Dairy prices declined. The kiwi is trading at 0.6693.

The US Dollar Index weakened by 1.6 percent yesterday as markets speculated that the US Federal Reserve might opt to not raise interest rates at all this year. This was due to the dovish comment made by the president of the Federal Reserve Bank of New York who warned that additional strength of the U.S. dollar could have “significant consequences” for the US economy.

Moreover, disappointing release of service data from the nation that showed sluggish growth in the activity thereby infusing concerns that weakness in manufacturing may be spreading to other sectors. All the above factors acted as a negative factor for the US Dollar Index.

Asian markets are trading mixed after a US Federal Reserve policymaker commented that the Central bank might opt to not raise interest rates at all this year. This led to slump in the dollar prices thereby sparking a huge rally in oil prices.

The euro rallied this week and gave back some gains in the morning session to trade at 1.1193. Euro rose by 1.7 percent yesterday owing to the weakness seen in the US Dollar Index which acted as a positive factor for the shared currency. Moreover, markets are still discounting the robust release of unemployment data from the Euro-zone which was lowest since September 2011 mainly due to robust jobs market in countries such as Germany.

The dollar stood little changed at 116.91 yen after sinking 1 per cent overnight. The greenback, which soared close to 122 yen recently, was heading for a 3.5 per cent loss on the week. It was poised to hand back all the gains made on the Bank of Japan’s surprise decision last Friday to adopt negative interest rates.

The markets will look to the US jobs data for direction, with the employment report expected to how employers adding 190,000 jobs in January, the median estimate of 108 economists polled by Reuters.

“Markets seem so determined to price out the risk of a Fed rate hike any time soon that it is hard to imagine a January US employment outcome strong enough to reignite pricing for March or June,’’ wrote Sean Callow, a senior strategist at Westpac.

“Even after the US dollar’s sharp fall in recent days, there still seems to be greater scope for a USD fall on a weak reading than for a rally on a strong outcome.’’

Investors holding the Pound were dealt a double blow, with the minutes of this week’s BOE monetary policy meeting revealing that all nine committee members had voted to sit on their hands and leave Base Rate at 0.5%.

MPC member Ian McCafferty has been the committee’s serial dissenter during recent months, voting for a hike at every meeting from August until January, but even this arch-hawk could not find it within himself to come out in favor of a hike this month, given continuing ultra-low global oil prices. The GBP is trading at 1.4560 falling 29 points in the morning session.