EUR/USD Makes New Record High, RBNZ on Hold
Dollar falls to another record low against Euro and weakens across the board along with the Japanese yen after a volatile session on Wednesday. Dollar’s weakness was initially limited after mixed job data from US which provides no hints on how the NFP on Friday will be. However, better than expected ISM services reading boosted stock higher, which in turn hammered the Japanese yen on improved risk appetite. Most major currencies then rode on strengthen in respective yen crosses and strengthened against the greenback. Also, the Fed’s pessimistic Beige book provided little support to the dollar.
ISM non-manufacturing index rebounded strongly from 44.6 to 49.3 in Feb, very close to 50 contraction/expansion level. In addition, the business activity index also rebounded stronger from 41.9 to 50.8. Employment component improved mildly from 43.9 to 46.9. meanwhile, price paid component continued to retreat and dropped from 70.7 to 67.9. While the data still suggest a contraction in non-manufacturing industry in the near term, the pace could be much slower than previously expected.
Employment data released today was mixed. The private ADP employment report showed -23k contraction in the job market in Feb, comparing to expectation of +20k expansion. Prior month’s growth was also lowered from 130k to 119k. However, the Challenger report showed that layoff announcements fell slightly from 75k to 72k in Feb. After all, the ADP employment report has lost its predictive value to NFP in recent months and the conflicting signal certainly gave no help in predicting Friday’s NFP.
Other data from US saw Q4 productivity at 1.9% vs expectation of 1.9%, labor costs growth at 2.6%, much stronger than expectation of 2.1%. Factory orders dropped -2.5% in Jan, inline with consensus.
FOREX is a serious game. Play it with the pros.Forex trading involves substantial risk of loss, and may not be suitable for everyone.
Easy-Forex? Others offer promises. WE deliver.
Forex trading involves substantial risk of loss, and may not be suitable for everyone.
Forex online. Without it, you are wasting your time (and money).
Forex trading involves substantial risk of loss, and may not be suitable for everyone.
Control your destiny.
Forex trading involves substantial risk of loss, and may not be suitable for everyone.
Fed’s Beige Book was generally pessimistic. Two-thirds of Fed districts reported weakening growth since last report. The slowing in economic activities was broad-based, extending further to manufacturing, retail and non-financial services. More than half of the districted reported retail sales as "below plan, downbeat, weak or having softened". COnditions in non-financial service industries were downgraded to "mixed". Manufacturing was "subdued". Residential real estate was "generally weak". More districts also reported "some loosening" in the labor markets", with "pullbacks in the pace of hiring" and "increased prevalence of layoffs". Markets are generally increasing bets for Fed to cut rates by another 75bps on Mar 18.
RBNZ left the Official Cash Rate unchanged at 8.25% as widely expected. In the accompanying statement, RBNZ noted that there is "more uncertainty than usual" with downside risks to growth and upside risks to inflation. Hence, then bank judges to OCR needs to remain at current level for "a significant time" to ensure inflation remains around target over the medium term.
Australia trade balance, Japan leading indicators and machine tools orders will be released in the coming Asian session, but markets will remain cautious with BoE and ECB rate announcements scheduled later in the day.
Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box
