The U.S. Dollar finished the day higher against a basket of major currencies. The weaker than expected ADP Employment Report encouraged investors to think twice about buying higher yielding assets. This afternoon’s Fed Beige Book offered nothing new for investors to react to and the Dollar held its ground.
The EUR USD erased all of this morning’s earlier gains and finished lower for the day. Traders were a little hesitant about getting aggressively long at $1.51 ahead of the tomorrow’s European Central Bank meeting, but managed to hold the psychological $1.50 support. The ECB is expected to leave interest rates unchanged while providing an outline of details on how it will wind down its government stimulus packages.
The GBP USD managed to follow-through to the upside overnight while overtaking a key retracement level at 1.6646. The strengthening Dollar during the New York session helped push the British Pound back inside of a technical retracement zone at 1.6575 to 1.6646. It is possible that this market is forming another lower top but may need a couple of days to confirm the formation.
Traders pressured the Japanese Yen all day after a Bank of Japan official expressed his concern about the rise in the currency. Despite official denials, traders are beginning to position themselves for a possible intervention by the BoJ if the Yen continues to appreciate too much. The Bank of Japan and the Japanese government want to avoid currency volatility. They both feel that economic growth cannot be sustained if the Yen is fluctuating too much. This uncertainty is likely to boost the USD JPY until the BoJ meets on December 17th.
The USD CHF picked up strength all day after flirting with par the past few days. The weak U.S. ADP report helped encourage the selling of stronger currencies today. Don’t expect too much of a rally because the Swiss economy is showing signs of strength.
The USD CAD finished higher following Wednesday’s weaker than expected ADP employment report. Weaker equity markets triggered by the ADP report also helped to pressure the Canadian Dollar. The weaker than expected EIA crude oil report coupled with Tuesday’s bearish API report also encouraged selling in the crude oil. This action helped to fuel the rally in the USD CAD.
Lower stock prices and a stronger Dollar triggered a drop in demand for higher yielding assets which put pressure on the AUD USD and NZD USD. Both of these markets erased overnight gains and finished lower for the day. The closing price reversal top in the S&P 500 market could lead to more pressure on the Aussie and Kiwi tomorrow if this stock index follows through to the downside.
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