ECB Press Conference & Nonfarm Payroll Report Keep Forex Traders Focused

Global currencies were generally stronger against the greenback over the European and US sessions on Wednesday. The euro rose from lows near $1.2585 to highs near $1.2635, ending US trade near the $1.2615. The Australian dollar rose from lows near 0.8685 to highs around 0.8745 before ending the US session near 0.8735. The Japanese yen firmed from ¥109.94 per US dollar to ¥108.90, ending US trade near its strongest levels. Weakness in Japan’s economy has boosted expectations that the BoJ would be forced to launch more easing measures to counter the downturn. On Thursday morning the JPY eased by 10 points to trade at ¥108.79 while the AUD recovered 56 points to reach 0.8789 giving support to its cousin the kiwi which gained 48 points to reach 0.7834. The Australian Bureau of Statistics released both building approvals and trade balance data this morning. Building approvals rose 3 per cent in August, while the trade deficit narrowed in the month, largely in line with expectations.

The US dollar eased 15 points to trade at 85.85. US treasury prices rose on Wednesday as investors opted for safe-haven assets like government bonds and gold. A decline in US manufacturing activity and news of a confirmed Ebola case affected sentiment.  The ADP national employment index showed that 213,000 private sector jobs were created in September, just above forecasts. Construction spending fell by 0.8 per cent in August, short of forecasts for a 0.5 per cent gain. And the ISM manufacturing index eased from 59 to 56.6 in September, short of forecasts for a reading near 58.5.

European shares fell yesterday as data on manufacturing across the eurozone was generally disappointing with a contraction in German activity for the first time in 15 months. The German DAX and UK FTSE both lost 1.0 per cent. And Australia’s major miners were weaker in London trade with shares in BHP Billiton down by 1.4 per cent while Rio Tinto fell by 0.4 per cent.

News of the first Ebola case in the US upset traders while markets are not sure what the long term effects of the disease might have on tourism if the disease spreads. This was compounded by the ongoing Hong Kong protests which continued on the National Day celebration as the Chinese government lets the protesters continue without trying to quell the protests.

Traders will send the day waiting for Mario Draghi’s press conference due later in the European session. The euro recovered after falling to a recent low. The euro added 14 points this morning to trade at 1.2633 after touching a low at 1.2580 on Wednesday. Most investors are hoping that Mr. Draghi will introduce additional stimulus but some are expecting just words as Mr. Draghi lays the ground work for a full blown QE program in the near future.

The US dollar will become the main focus of the markets immediately after Mr. Draghi’s press conference as hopes for an earlier-than-expected US interest rate hike have been drawing investors back to the dollar amid signs that a recovery in the world’s number one economy was taking hold. But the employment figures on Friday will be crucial to cementing that optimism after US consumer confidence fell for the first time in four months and weakness in Chinese manufacturing stoked renewed fears about the global economy.