This morning, US initial jobless claims came in better than expected showing 451K new claims vs. an expectation of 470K. While this is a step in the right direction, it is still at unacceptably high levels and may remain there for some time unless we get a shift in government policy.
Earlier in the morning, the BOE maintained current monetary policy as was expected, so recent signs that inflation concerns may be rising will be revealed from the monetary policy meeting minutes due out in about two weeks. The pound is weaker as a result.
Overnight, the Australian employment change came in better than expected as well, reporting a gain of 31K vs. an expectation of 25K.
So the market is in a bit of risk-taking mode to start the day, led by the commodity currencies and the Euro.
In the forex market:
Aussie (AUD): The Aussie is higher as risk appetite has returned to the market this morning. Better than expected employment figures have increased demand as the Australian economy still appears to be operating on all cylinders, with the jobless rate at 5.1%.
Kiwi (NZD): The Kiwi is higher on risk taking despite the fact that home prices increased at their slowest pace as consumer borrowing declined as home interest rates increased. In addition, weaker manufacturing figures showed that growth may be slowing.
Loonie (CAD): The Loonie is also higher falling in line with risk themes and its appropriate place in the risk hierarchy. Providing an additional bid is higher oil prices, which have increased to 75.50. However, housing starts came in less than expected and the Canadian trade deficit widened to the largest levels on record, as lack of US demand hurt exports.
Euro (EUR): The euro is mixed today under classic risk-taking scenarios. The market is brushing off “news” that comments from an ECB member claimed that German banks are also under-capitalized. In Germany, CPI data came in slightly better than expected, though still showing that inflation is tame.
Pound (GBP): The Pound is lower across the board as the BOE maintained monetary policy as expected. In addition, the UK trade balance figures showed a wider than expected trade deficit, most likely the result of recent Pound strength.
Dollar (USD): The Dollar is mostly lower, including against the Yen as US stocks are higher after the “encouraging” initial jobless claims figures.
Yen (JPY): The Yen is mostly lower, though posting slight gains against the Pound and Dollar. Overnight, consumer confidence figures came in lower than expected and tonight Japanese GDP figures are expected to show growth of .4% for the quarter, with the annualized figure at 1.5%. However, the huge story is still over Yen intervention, and the market appears to be testing government resolve.
Today’s initial jobless claims figures are giving the bulls a reason to push markets higher despite the fact the figure is still bad by historical standards. I guess you have to take your small victories where you can get them.
Meanwhile, in the UK the BOE appears to be discounting inflation concerns in favor of hoping to encourage further growth.
I’m becoming very skeptical of news coming out of the EU regarding the debt crisis as it seems to be a convenient way to attempt to keep the Euro low to help encourage exports. Until action is needed and a problem occurs, I am content to remain positive that the ECB will handle it.
The commodity currencies keep chugging along as those economies appear to be doing better than the more established ones.
And lastly all eyes are on Japan as the intervention talk heats up with every day’s Yen appreciation vs. the Dollar.
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