The Australian dollar rose on speculation that the Reserve Bank of Australia cut interest rates. Interest rate futures indicate only 20 percent probability that RBA Governor Glenn Stevens reduced the bank's main rate on 6 September. Most traders believe that is 80 percent chance the central bank kept key rates unchanged this month. Australia cash rate target rate is considered larger loans among developed nations.
Aussie's demonstration seemed unstoppable until the U.S. non-farm payrolls came out, sending markets into chaos and destruction of risk appetite to go out even worse than the most pessimistic forecasts. The Australian currency managed to stay above the opening this week, but erased the three days of gains against the dollar and the yen. Worse, it appears that the currency associated with the growth may continue to fall next week as the style of the risk aversion of thought is to return to the markets.
AUD/USD opened at 1.0583, jumped to 1.0764 and closed at 1.0641 this week. EUR/AUD slid from 1.3692 to 1.3346. AUD/JPY jumped from 81.23 to 82.81 during this week before closing at 81.71.
Forex traders that the owner of Euro want to find a safe haven in Europe's economy shows signs of slowing. The yen and the franc, the currencies being conventional insurance, are the logical choice, but under the threat of intervention. The dollar was feeling the pressure of all the potential third of the quantitative easing for some time and now, after the very unfavorable payrolls were released, intensifying the pressure. No wonder, considering all factors, some traders look at the new pounds of protection.
The problem with thinking about the British pound as the protection of Europe's problem is that Britain has its share of problems. The index of home prices nationwide fell 0.6 percent in August. The manufacturing Purchasing Managers' Index fell from 49.4 to 49.0 in August, the lowest reading in 26 months, while construction PMI fell to 52.6 in August from 53.5 in July.
GBP/USD closed at 1.6215 after jumping during the trading session from 1.6177 to 1.6253. EUR/GBP sank from 0.8812 to 0.8746 before closing at 0.8761.
The U.S. dollar fell against other currencies, including the British pound and Japanese yen today after the non-farm payrolls showed that job creation in the U.S. stagnated. The currency also fell against the euro, but recovered later.
U.S. non-farm payrolls showed no growth in employment in August. That is far worse than market expectations (growth of 74 000) and the worst reading since September 2010, when employment fell by 95,000. Average hourly earnings fell 0.1 percent, while markets had an increase of 0.2 percent. The poor economic report renewed speculation the Federal Reserve needs third round of purchases of assets, known as quantitative easing to boost the economic recovery in the United States.
The index of the dollar managed to rise 0.3 percent, to 74,683 today from 74,479 yesterday. The dollar pared losses against the pound and the yen and rebounded against the euro. The Standard & Poor's 500 fell to 2.3 percent.
GBP/USD climbed from 1.6177 to 1.6253 before trading at 1.6220 as of 19:40 GMT today. USD/JPY fell from 76.91 to 76.80 and touched low of 76.52 intraday. Meanwhile, EUR/USD tumbled from 1.4257 to 1.4199.
The Swiss franc rose today against the U.S. dollar, extending its rally for a third day, after non-farm payrolls showed that U.S. employers were not adding jobs last month.
U.S. nonfarm employment payroll in August were unchanged, while the unemployment rate remained at 9.1 percent. Analysts predict an increase in payrolls by 74,000. Value in July was revised down from 117,000 to 85,000. It will be interesting to see how the Fed will react to such disastrous economic data and what steps will be taken.
USD/CHF plunged from 037954 to 0.7811 as of 13:45 GMT today. Earlier, the currency pair reached 0.7711, the lowest level since August 12.
The South African rand fell today as the uncertainty of the forex traders on the global economy's ability to maintain demand for reducing the growth of safer currencies. Currently, however, the rand recovered.
Market participants were less inclined to believe the global economic recovery after the report from Automatic Data Processing showed on August 31 that U.S. employers added 91,000 jobs last month, less than expected reading of 102,000. Market sentiment improved slightly after the report showed yesterday that the number of jobless claims fell from 421,000 to 409,000 last week. Today we will see non-farm payrolls that must have a major impact on markets.
USD/ZAR traded near 6.9950 today as of 12:31 GMT, while previously it surged from 6.9870 to 7.0230.
The Swedish krona fell in the report showed that manufacturing contracted in Sweden last month, reinforcing the view that the central bank could cut interest rates.
The manufacturing index fell to 48.7 from 50.1 in August Swedbank in July, while the average forecast was 49.8. A reading below 50.0 indicates decreased. That was the first decline in two years.
The adverse report agree that the Swedish economy is too week to support the current level of borrowing costs, let alone to survive further adjustment. According to Credit Suisse rates the central bank cut interest rates in the next 12 months.
USD/SEK jumped from 6.3377 to 6.4127. The currency pair has recovered somewhat today, trading at about 6.3936 as of 1:45 GMT.
The U.S. dollar advanced today as the unexpected growth in the U.S. manufacturing spurred speculation the Federal Reserve will not need to stimulate the economy by debasing the U.S. currency.
The Institute for Purchasing Managers Index Supply Management "was at 56.6 in August, with little change in the July figure of 56.9. The index is expected to fall to 48.7. A reading below 50, 0 indicates deterioration and above this value indicates expansion. Positive data suggest that perhaps the U.S. economy is in a state not bad enough to justify a new round of quantitative easing.
Unemployment claims fell from 421,000 to 409,000 last week, reducing concerns about the use to some degree. Another important reason for the concerns of the Fed, the housing market, made worse because the construction cost has not increased by 0.2 percent, as promised by the forecasts, but fell by 1.3 percent.
EUR/USD opened at 1.4374 and dropped to 1.4226 before trading near 1.4259 as of 22:57 GMT today. GBP/USD fell from 1.6249 to 1.6183, while reached the intraday low of 1.6130 earlier. USD/JPY advanced from 76.64 to 76.86 and earlier touched the high of 77.24.
The Australian dollar advanced today against the euro and Japanese yen after the report showed that retail sales in July rose more than expected.
Australia retail sales rose 0.5 percent in July, while growth was 0.3 percent forecast. Retail sales fell 0.1 percent in June. MSCI Asia Pacific index gained 0.7 percent and the Standard & Poor's 500 Index advanced 0.5 percent.
EUR/AUD slipped from 1.3427 to 1.3349, while AUD/JPY climbed from 82.04 to 82.37 today as of 10:54 GMT.
The Swiss franc gained for a second day today, yesterday broke his three-day drop against the U.S. dollar and the euro, as the Swiss National Bank has announced new measures to curb the strength of the franc.
Previously, the Swiss currency was swept by speculation that the central bank parity of the franc to the euro's performance. Market participants expect the SNB would release some information about euro-or, perhaps, other measures to drain the strength of the Swiss currency. No one, traders spurred speculation that the Bank is satisfied with the current rate of the franc in relation to the euro.
USD/CHF fell from 0.8059 to 0.8001 and EUR/CHF dropped from 1.1585 to 1.1427 as of 10:38 GMT today.
