Market Brief
Investor sentiment remained risk averse as the dollar index rose .70% to 78.09 in anticipation of tomorrow’s unemployment data. The EurUsd was trading slightly lower near 1.43, while the UsdJpy appreciated 63pips to the mid-range of 95. The GbpUsd fell 206 pips intraday, keeping the cable near 1.675 as a point of resistance. Equity markets were down in the U.S. and Europe, with the Dow lower by .57% or -53.20pts and the FTSE lower by .52% or -24pts. The yield curve declined slightly with the 10yr up by 2bps and 30yr lower by 4bps. Commodities were lower across the board with oil finding support at $72bbl and gold dropping below $962oz.
The dollar and yen rallied during intraday trading as vigilant investors paused ahead of tomorrow’s U.S. unemployment and non-farm payroll numbers. Before the bell, investors were surprised by U.S. jobless claims which fell 38k to 550k versus estimates of 580k, and equity futures rose slightly in response. In the Euro Zone the ECB met today and decided to keep its refinancing rate unchanged. Central Bank President Jean Claude Trichet commented that the “Pace of [economic] contraction is clearly slowing down” and the “remainder of 2009 will be weak but better than Q1.” In Germany, June factory orders increased the most in two years at 4.5% versus 0.6% expected, a strong signal that Europe could be on its way to recover from the recession. Should the euro break resistance at 1.4445, Technical Analysts are predicting a rally to 1.45. Doubt in the U.K. hurt bullish investors following today’s BoE meeting where officials said they felt the economic crisis was worse than it had initially projected and unexpectedly decided to increase its 125bln pound bond purchase program by 50bln pounds. The BoE’s benchmark interest rate was kept at .5% as expected, but after its monetary policy adjustment, the pound fell 125pips from its highest level since October to the upper range of 1.68.
Further central bank activity in Canada arose where the BoC decided to keep the benchmark interest rate at .25 last month, the BoE is expected to leave the number unchanged should the loonie rapidly rise in value and threaten to prolong the economy’s contraction. Following yesterday’s comments by Flaherty and unchanged WTI crude, the loonie was trading 76pips lower.
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