USD
The dollar weakened on Thursday after Initial Jobless Claims rose by 1k from the previous week to 326k. Despite the fact that this still beat expectations of 330k, it was nevertheless seen as a negative sign for the economy, in the light of other recent employment data. Continuing Claims, for example, showed a much higher-than-expected result at 3,056,000 compared to the 2,095,000 forecast, and also an increase on the 3,030,000 previous figure. This continued to suggest the job market was vulnerable. The recent NFP result was more than 1 standard deviation lower than forecast, and shocked markets, temporarily raising doubts over whether the Fed would continue contracting QE. However, many Fed officials have dismissed the figure as a ‘one off’ which will not alter the path of tapering. Interim data like today’s Initial and Continuing Jobless Claims numbers, however, suggest otherwise, and the dollar may have weakened as additional doubts may have crept in as to whether the Fed will taper at the 28/29 Jan meeting when Bernanke hands his sceptre and crown to the arch-dove Yellen.
EUR
The euro fell on Thursday after data from the euro-zone beat expectations, reducing the probabilities that the ECB would loosen its monetary policies as had been feared. Euro-zone PMI’s rose across the board with the Composite figure coming out at 53.2 when it had been expected to rise just 3 basis points to 52.4 from 52.1 previously. Both Euro-zone Services and Manufacturing PMI’s roundly beat estimates, although the biggest rise came from Manufacturing which increased by 9 basis points above the forecast figure to 53.9, and 12 above the December figure. Of the individual nations, France’s performance was especially noteworthy after it also increased well above expectations, which compared favourably to last month’s poorer-than-expected result. The single currency was further supported by data showing the Current Account surplus in November, rose compared to the previous month, with the seasonally adjusted figure coming out at 23.5bn from 22.2bn in October.
GBP
The pound traded mixed on Thursday after a light news calendar meant it was more subject to the impact of other currencies. The strong rally after yesterday’s better-than-expected unemployment data paused to consolidate as many traders booked profits. There was a complete reversal against the euro after data from the euro-zone showing higher than expected Manufacturing and Services PMI’s led to a revision of the outlook for ECB policy which had been erring on the side of expecting further easing. Stirling did rise agaisnt the dollar again, however, after lacklustre employment data showing a rise in Initial and Continuing Claims raised concerns that the labour market might be suffering more than previously thought, and that this could persuade the Fed to ‘put the brakes’ on tapering. On the data front CBI Reported Sales in January, failed to meet estimates, reaching only 14 versus the 25 expected.
JPY
The yen strengthened after the release of the BOJ economic report which forecast a rise in exports due to a recovery in overseas markets, especially in advanced economies. It also mentioned an increase in industrial production and corporate investment. The economy continued to be described in terms of “recovering moderately”. The main change came in highlighting the recovery made in developed as opposed to emerging economies. The January report showed a notable absence of any mention of the euro-zone debt crisis as a risk factor or the risk associated with concerns about the pace of the recovery in the U.S economy; instead, it stated in a general way that: “there remains a high degree of uncertainty about the global economy.” The report also focused on how the imminent sales tax hike in April was front-loading purchases before the tax rises came into effect. It backed up the perception that the global economy had made a strong recovery recently. The yen was also probably supported by yesterday’s comments from BOJ governor Kuroda who dismissed the need for more stimulus as the economy was on track to meet current targets.