Euro Off 2-day High Against Pound And Swiss Franc
The European currency erased its Asian session gains against its major counterparts in early European deals Friday as European equities trimmed their initial gains ahead of the U.S. Labor Department’s highly anticipated monthly employment report, which is due out later in the day.
The common currency exhibited strength in Asian trading after the European Central Bank raised its benchmark interest rate by 25 basis points to 1.5 percent as expected and signaled for further monetary tightening.
Besides, the ECB also relaxed the collateral rules for Portuguese debt saying that the austerity program adopted by the country’s government was appropriate. This suspension of the minimum credit rating threshold will be maintained until further notice, the bank said. Previously, the central bank made such provisions for Greece and Ireland.
A much bigger than expected rise in private sector employment in June, a decline in initial jobless claims in the week ended July 2 and an encouraging report on retail sales helped optimism elevated that a government report today will show companies in the U.S. added twice as many workers as forecast in June.
Yesterday’s ADP National Employment Report showed private employment grew by 157000 jobs in June following a downwardly revised increase of 36,000 jobs in May, suggesting that the U.S. economic recovery, which slipped in the spring, might have found new traction in early summer.
In economic news, German exports grew more than expected in May after easing in April, data from the Federal Statistical Office showed. Exports advanced 4.3 percent month-over-month, compared to April’s 5.6 percent drop, netting a trade surplus of EUR 14.8 billion versus EUR 10.8 billion in April.
Meanwhile, German manufacturing turnover dipped 0.9 percent month-on-month in May after adjusting to seasonal and working day variations, the Federal Statistical Office said today. Year-on-year, turnover in manufacturing grew 6.3 percent in May after adjusted for working-day variations.
The euro that climbed to a 2-day high of 1.2171 against the Swiss franc around 3:20 am ET shed almost 50 pips shortly to reach as low as 1.2126 around 4:00 am ET. On the downside, the common currency may test support around the 1.2090 level. The euro-franc pair is presently worth near Thursday’s closing value of 1.2128.
Switzerland’s unemployment rate remained unchanged in June, data from the State Secretariat For Economic Affairs (SECO) showed today.
The seasonally adjusted jobless rate remained at 3 percent in June, unchanged from May. The figure marched economists’ forecast. The unadjusted jobless rate fell to 2.8 percent as expected from 2.9 percent in the previous month.
The common currency also slipped to 0.8964 against the pound around 3:40 am ET, after having touched a 2-day high of 0.9003. If the euro weakens further, 0.89 is seen as the next likely target level. The euro-pound pair that closed yesterday’s deals at 0.8993.
The Bank of England on Thursday left its key interest rate unchanged at a historic low of 0.5 percent again as expected and maintained the size of the quantitative easing at GBP 200 billion.
The euro that tested yesterday’s highs against the currencies of the U.S. and Japan in the Asian session reversed direction in early European deals. The single currency reached a low of 116.38 against the yen and 1.4307 versus the greenback around 4:10 am ET, down from previous highs of 116.82 and 1.4370, respectively. If the euro weakens further, it may find target levels at 1.4280 against the buck and 116.0 against the pound.
Japan saw a current account surplus of 590.7 billion yen in May, the Ministry of Finance said today, down an annual 51.7 percent. That was significantly better than forecasts for a decline of 75.2 percent to 306.0 billion yen following the 69.5 percent contraction in April to 405.6 billion yen.
The trade balance showed a deficit of 772.7 billion yen, missing forecasts for a 764.0 billion yen shortfall following the 417.5 billion yen deficit in the previous month.
The euro also reached as low as 1.3279 against the Australian dollar, 1.3716 against the Canadian dollar and 1.7187 against the NZ dollar before holding steady around 4:15 am ET. On the downside, the single currency may find target levels at 1.7160 against the kiwi, 1.3250 versus the aussie and 1.3670 against the loonie.
Looking ahead, U.K.’s Office for National Statistics is set to publish input and output price figures for June at 4:30 am ET.
At 7:00 am ET, Canada will release its jobs data for June.
The U.S. Labor Department’s non-farm payrolls report for June and the wholesale inventories data for May are expected to influence trading in the New York morning session.
