Market News & Insights
7 April 2015

Dollar Gains Have Been and Gone

EUR/USD 1.0893
GBP/USD 1.4885
GBP/EUR 1.3670 (0.7316)
EUR/CHF 1.0443
GBP/CHF 1.4278
GBP/AUD 1.9409

With much of Europe and the UK returning to work after the Easter break, many may be a little surprised to see where the dollar was against some of its major pairings. Before the Easter break we had signs of further strength from the US labour market with the fewest unemployment claims in 9 weeks. While not directly related there was a sense of optimism for Friday’s Non Farm Payroll figure for March. However the figure disappointed and came in at 126,000 which was well below analyst expectations of 246,000.00 and marked its lowest reading since December 2013. As a result of the reading the US dollar index dropped 0.78 percent to 96.76 on Friday. The release has also helped US stocks rebound with the weak reading renewing hope of a delay in increasing interest rates.

The Dollar however has since firmed and recovered much of its payroll inspired losses. Following the Non Farm Payroll release, we have seen a number of Fed speakers come to the fore quashing any suggestion of a substantial slowdown. The most recent of these was Federal Reserve Bank of Atlanta President Dennis Lockhart, who felt that the recent economic weakness wouldn’t persist and favoured pushing out the central bank’s first rate increase till beyond the next two meetings. Lockhart echoed Fed presidents William C. Dudley of New York and Jeffrey Lacker of Richmond, who said recent economic weakness doesn’t change their view of the outlook. However Dudley did dampen spirts somewhat when he stated that the pace of interest rate increase would likely be “shallow” once the Fed do start to tighten.

The common currency currently stand at EURUSD 1.0893, down from Monday’s highs of 1.1036. The euro has repeatedly failed to hold above $1.10 in the past few weeks, suggesting there is plenty of selling interest above that level. It’s a similar story for the pound where GBPUSD reached highs of 1.4980 following Friday’s release, however the pair has turned lower and this morning is back under 1.4900.

In overnight news, the Australian Dollar rose against all its major trading counterparts strengthening by as much as 1.6% against a basket of thirty one currencies after last night’s decision by the Reserve Bank of Australia to keep its benchmark cash rate unchanged at 2.25%. Markets were split almost 50:50 over whether another rate cut would take place. The Aussie Dollar managed to break through the .7700 point versus the US Dollar at one stage earlier this morning but has since given back some of the gains after re-assessment that the rate cut is now inevitable and that last night’s decision was just a delay.

Looking ahead to later this week, no surprises that Greece is back in the limelight again as the much reported deadline for a €450M loan repayment to one of its credits (IMF payment) comes into play this Thursday. It has been reported that on Sunday Greek Finance Minister Yanis Varoufakis stated that Greece “intends to meet all obligations to all its creditors, as infinitum” which certainly shows confidence, that maybe Thursday’s payment will be made and that Greece is choosing to pick other future repayment fights.