The dollar rallied to more than three-and-a-half year highs against the yen and its highest level against the euro in three months on Friday after official data showed that the US economy added significantly more jobs than forecast in February. The US economy added 236,000 jobs last month, blowing past expectations for an increase of 160,000. The unemployment rate ticked down to 7.7%, the lowest level since December 2008, from 7.9% in January. The robust data added to speculation over an earlier-than-expected end to the Federal Reserve’s easing program, bolstering demand for the dollar.
The dollar rose sharply against the yen, with USD/JPY hitting a session high of 96.56, the highest level since August 2009. The yen remained under pressure as expectations for more aggressive easing measures by the Bank of Japan remained intact. The BoJ left the size of its asset purchase program on hold at JPY76 trillion at Governor Masaaki Shirakawa’s final meeting on Thursday before incoming governor Haruhiko Kuroda takes over next month. At a parliamentary confirmation hearing earlier in the week, Kuroda said he would not set any limits on the amount of cash the central bank pumps into the economy.
The euro fell to its lowest level since December 11 against the dollar. EUR/USD dropping to a session low of 1.2956. The single currency shrugged off a one notch downgrade of Italy by Fitch’s ratings agency on Friday, citing inconclusive elections results and a deepening recession. The pound high fresh two-and-a-half year lows against the broadly stronger dollar, with GBP/USD falling to a session low of 1.4887. Sentiment on the pound remained weak amid concerns over the prospects for a triple-dip recession and the possibility of more easing by the Bank of England.
In the week ahead, investors will be closely watching US data on retail sales, industrial production and inflation to determine the strength of the economic recovery. Markets will also be eyeing developments in the euro zone and policy meetings by the Swiss National Bank and the Reserve Bank of New Zealand.
Monday, March 11
Japan is to publish official data on core machinery orders, a leading economic indicator. In the euro zone, France is to produce government data on industrial production. Switzerland is to release official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
Tuesday, March 12
The BoJ is to publish the minutes of its monetary policy meeting. The minutes give investors a valuable insight into economic conditions from the banks perspective. Australia is to publish a report on business confidence, an important indicator of economic health. The UK is to release official data on manufacturing and industrial production, leading economic indicators, as well as data on the trade balance, the difference in value between imports and exports. The US is to publish data on the federal budget balance.
Wednesday, March 13
Australia is to release a report on consumer sentiment, a leading indicator of consumer spending, as well as official data on home loans. The euro zone is to produce official data on industrial production, while Italy is to hold an auction of 10-year government bonds. The US is to release government data on retail sales, as well as official data on import prices, business inventories and crude oil stockpiles. The RBNZ is to announce its benchmark interest rate. The rate announcement is to be accompanied by the bank’s rate statement, which contains important insights into current and future economic conditions from the bank’s perspective and followed by a press conference.
Thursday, March 14
Australia is to release government data on the change in the number of people employed and the unemployment rate, a leading economic indicator. The SNB is to announce its Libor rate. The rate announcement is to be accompanied by the bank’s monetary policy assessment, which contains important insights into current and future economic conditions from the bank’s perspective. The ECB is to publish its monthly bulletin, which looks at current and future economic conditions from the bank’s viewpoint. Meanwhile, European Union leaders are to hold the first day of a two day economic summit. Canada is to produce official data on new house price inflation, a leading indicator of the health of the housing sector. The US is to release government data on producer price inflation, the leading indicator of consumer inflation and the weekly government report on initial jobless claims.
Friday, March 15
EU leaders are to hold the second day of an economic summit in Brussels. Meanwhile, the euro zone is to publish official data on consumer price inflation, which comprises the majority of overall inflation. Switzerland is to release official data on producer price inflation. The US is to round up the week with official data on consumer inflation and preliminary data from the University of Michigan on consumer sentiment. The US is also to release data on industrial production, the capacity utilization rate and manufacturing activity in New York state.
EasyForexNews Research Team