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12.05.2016 18:21

American focus: The US dollar strengthened against major currencies

The dollar fell moderately against the euro after the publication of weak US data, but soon resumed growth against the backdrop of changing risk appetite and the statements of representatives of the Federal Reserve. The Labor Department reported that the number of Americans who first applied for unemployment benefits unexpectedly rose last week, reaching its highest level in over a year, which may cause concern about the health of the labor market as a result of a slowdown in growth in the number of jobs in April. Primary applications for state unemployment benefits increased by 20,000 and reached a seasonally adjusted 294,000 for the week ended May 7, the highest level since the end of February 2015. Data over the past week have not been revised. Economists had forecast that the primary treatment will be reduced to 270 000 last week. Despite the leap last week, circulation remained below 300,000, a threshold associated with the health conditions of the labor market, for 62 consecutive weeks, the longest period since 1973. Labor Department analyst said there were no special factors influencing the data last week.

Another report presented by the Department of Labor showed that import prices rose 0.3% in April, following a revised increase with growth in March of 0.3%. Economists had expected an increase of 0.5%. Overall, import prices were still 5.7% lower than a year earlier. The annual rate was down every month for 21 consecutive months.

With regard to the statements made by the Fed, Mester said that market inflation expectations are volatile and may not be the best indicator. She also noted that does not believe that the inflation trend has changed completely, according to Mester, weakness, inflation is caused by a temporary weakening of oil prices, a stronger dollar. Meanwhile, Boston Fed President Rosengren said that the Fed is likely to raise rates more than markets currently anticipate. "If the predictions come true, step by step ahead of us raising rates", - said the politician. He also paid attention to the situation in the labor market. "The labor market data say about the" relatively confident "the growth of employment I am not concerned about a slowdown in hiring in April, but the Fed should be." Explore "how low can drop the unemployment rate," - said Rosengren.

The British pound appreciated significantly against the US dollar on the background of the results of the meeting of the Central Bank of England, but then lost almost all positions in view of the widespread growth of the US currency. Recall, the Bank of England decided unanimously to leave interest rates unchanged. Some observers believed that during the May meeting of the individual members of the central bank can vote for the lower rates. The Bank of England lowered its forecasts for economic growth and warned of the negative consequences of possible withdrawal of Britain from the EU, leaving no reason market participants to be optimistic about a pound. The Bank of England said that the way out of the EU can limit the growth of the economy, provoking an increase in unemployment and spur inflation. The members of the Committee on Monetary Policy Bank of England believe that if the country through a referendum citizens decide to withdraw from the EU, "it can dramatically change the prospects for economic growth and inflation" in the UK. If the Union will not be destroyed, the economic recovery will continue.

The yen rose sharply against the dollar after the release of weak data on the U.S. labor market partly recovered after falling in the first half of the session, which was caused by the statements of the head of the Bank of Japan and speculation that the Bank of Japan may decide to increase the monetary stimulus as early as next month. Today Governor of the Bank of Japan Haruhiko Kuroda reiterated once again that the Bank of Japan in case of necessity is an additional policy easing. Kuroda added that he sees significant downside risks to the Japanese economy and inflation, and the Bank of Japan "without delay" to take additional measures if necessary. Also reports the April meeting of the Bank of Japan were published today, which states that Japan's economic conditions are relatively stable, and the risk for inflation has increased since the beginning of the year.

Market Focus

  • The Bank of Japan decided by a 7-2 majority vote to hold the interest rate at -0.10%
  • Earnings Season in U.S.: Major Reports of the Week
  • U.S. commercial crude oil inventories decreased by 4.7 million barrels from the previous week
  • Australian unemployment rate stable at 5.6% in June
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