USD/JPY Above 100

The dollar was mostly lower versus its rivals on Friday. US nonfarm payrolls fell 663K and the unemployment surged to a 25-year high of 8.5% in March. Risk sentiment remains a main driver in the FX market and a plunging labor market did not hurt risk appetite. US stocks advanced and the Dow rose 40 points to 8018. The euro was modestly higher. The eurozone services PMI rose modestly, still indicating a continued contraction in the eurozone services industry, while German import prices posted a record yearly decline. The weak data reinforce our view that the European Central Bank is behind the curve and yesterday’s less-than-expected rate cut was a missed opportunity to forcefully stimulate the slacking European economy. Sterling gained for a fourth consecutive day against the greenback and for a sixth straight day versus the euro, as the UK services PMI rose to a 6-month high in March, adding to optimism the UK recession may be easing. The Australian and Canadian dollars rose for a fourth consecutive day on better risk appetite.

The USD/JPY rose to the highest level since November 4 and closed above the psychological important 100 handle. The Japanese economy is in its worst economic slump for decades with domestic and foreign demands plunging and business confidence at a record low. We expect Japanese investors to move money abroad in search for higher returns. Next week’s release of the leading economic index is likely to indicate a continued deterioration in economic conditions in Japan. The USD/JPY, having risen for the nine out of the last 10 weeks, is likely to continue its ascent. There are resistance in the 102 area and support in the 99 area.


Financial and Economic News and Comments

US & Canada

US nonfarm payrolls declined 663,000 in March while revisions to January and February subtracted extra 86,000 jobs, data from the Labor Department showed. Private payrolls fell 658,000, with declines in almost all major sectors. The weakest job categories were manufacturing (down 161,000), professional and business services – including temps, architects, and engineers – (down 133,000), and construction (down 126,000). The strongest sector was health care (up 14,000). The unemployment rate rose to a 25-year high of 8.5% in March from 8.1% in February, as forecast. Average hourly earnings increased $0.03, or 0.2% m/m, as expected, to $18.50, and rose 3.4% y/y. Average weekly hours declined to 33.2, the fewest since records began in 1964, from 33.3. Including the 663,000 decline in March nonfarm payrolls, the US economy has lost approximately 5.1 million jobs since the beginning of the recession in December 2007.

The US ISM non-manufacturing index unexpectedly fell to 40.8 in March from 41.6 in February, indicating the US services industry contracted at a faster pace but remained above levels seen late last year during the worst part of the recession, data by the Institute for Supply Management showed. The new orders index declined to 38.8 in March from 40.7 in February, and the employment index fell to 32.3 from 37.3. The prices paid index decreased to 39.1 from 48.1. However, today’s ISM report showed an encouraging sign with the business activity index rebounding to 44.1 in March from 40.2 in February.

Europe

The eurozone services PMI increased more than expected to 40.9 in March, according to final data by Markit Economics, up from an advance estimate of 40.1 and February’s record low 39.2, indicating the eurozone services industry contracted at a slower pace, Taken with the manufacturing PMI at 33.9, the composite PMI rose more than estimated to 38.3 from February’s 36.2.

The German services PMI was at 42.3 in March, final data by Markit Economic showed, up from an advance estimate of 41.7 and February’s record low 41.3, indicating the services sector in Germany contracted at a slower rate.

Germany’s import prices declined 0.1% m/m in February after a 0.5% m/m slide in January, the Federal Statistical Office said. February import prices fell 6.4% y/y, the deepest decline since January 1999, following a 5.4% y/y fall in January. Export prices remained unchanged m/m in February. Export prices declined 1.2% y/y, following January’s 0.9% y/y decrease.

The CIPS/Markit UK services PMI increased more than expected to 45.5 in March, a 6-month high, from 43.2 in February, signaling an improving condition in the UK services sector, the Chartered Institute of Purchasing and Supply and Markit Economics reported.

UK house prices declined 1.9% m/m in March after falling 2.3% m/m in February, according to Lloyds Banking Group Plc’s Halifax house price index. House prices dropped 17.5% y/y in the three months through March.

Switzerland’s consumer prices were down 0.3% m/m in March after a 0.2% m/m decline in February, the Swiss Federal Statistical Office said. March consumer prices fell a more-than-expected 0.4% y/y, the largest decline since December 1959 led by a 32% y/y drop in oil costs, after February’s 0.2% y/y increase.
Asia-Pacific

The AiG performance of service index improved to 35.6 in March from 32.2 in February, having been below 50 indicating a continued contraction in the Australian services industry since April 2008, the Australian Industry Group reported.

FX Strategy Update

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Источник: Hans Nilsson

03.04.2009