Euro Left Out of the Action (page 2 of 2)

British pound hits 2.5 month low

The British pound hit a 2.5 month intraday low against the US dollar following the release of the UK employment report and the Bank of England's Quarterly Inflation report.

For the third month in a row, the number of people claiming unemployment benefits has increased which is a reflection of the softer labour market. Interestingly enough wages actually rose by 4%, the highest level since November.

The surprise came primarily from bonuses because earnings growth excluding bonuses remained at 3.8%. According to the RICS, the house price balance fell to the weakest level on record as prices decline across the country.

These numbers shifted the market's focus away from the BoE's concern about inflation and onto their prospects for growth. Even though inflation is expected to remain well above their 2% target for the remainder of the year, the Bank of England revised down their GDP forecasts for next year from 1.6% to 1%. This is a huge alteration and reflects their degree of pessimism.

Triple blow to commodity currencies

The Australian, New Zealand and Canadian dollars have weakened across the board as the US dollar extended its gains, commodity prices pared back and economic data disappointed.

Despite a strong labour market, wage growth in Australia slowed in the first quarter while foreigners reduced their holdings of New Zealand bonds.

The New Zealand dollar has weakened significantly over the past few months, having just hit a fresh 3 month low against the US dollar this morning. New Zealand retail sales and the business PMI report are due for release this evening followed by the Australian consumer inflation expectation and weekly wage report.

Even Canada has their manufacturing shipments report due for release, so expect some continued volatility in the commodity producing countries.

USDJPY breaks 105, but will the move continue?

USDJPY broke above the psychologically important 105 level but has failed to sustain its gains. At the end of the US trading session the currency pair was fluctuating around the big figure and now looks vulnerable to more losses, especially given the fact that the Dow has retraced more than half of its gains.

The market has given little weight to the stronger than expected Japanese economic data. The current account surplus increased in the month of March as well as the CGPI in the month of April. Machine orders are due for release this evening, but that should only have a nominal impact on the Yen.