EUR/USD
The currency markets were generally quiet ahead of the US employment data release with the Euro holding just above 1.3550 against the dollar.
The payroll data was slightly stronger than expected with an decline in employment of 36,000 for February after a revised decline of 26,000 the previous month while the unemployment rate held at 9.7%. There were some job losses due to the bad weather conditions, although the survey’s methodology suggests the losses may have been limited.
The headline data was generally favourable, but there will be some unease over the decline in work week as this suggests that underlying conditions are still fragile. The Federal Reserve will probably be looking for a sustained increase in employment before considering a tightening of monetary policy and the dollar will find it difficult to gain further support on yield grounds.
The Greek government passed the additional budget steps which provided some degree of support for the Euro as market tensions continued to subside. German Chancellor Merkel also stated that the Greek crisis will not effect the Euro which provided some underlying support for the currency.
As risk appetite improved during the US session, the Euro was able to advance to just above 1.3620. There will still be important vulnerabilities which is liable to deter strong Euro buying in the short term.
Source: VantagePoint Intermarket Analysis Software
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Yen
The yen maintained a weaker tone on Friday with fresh speculation that the Bank of Japan would announce a further easing of monetary policy over the next few weeks which undermined demand for the yen
Despite some nervousness over global economic trends, risk appetite was also relatively firm with an easing of fears surrounding the Euro-zone debt situation important in curbing defensive demand for the Japanese currency.
The slightly better than expected US employment report helped maintain the dollar’s yield advantage over the Japanese currency and there was also a favourable reaction in equity markets which again curbed yen demand and helped underpin the dollar. In response, the US currency pushed higher again with a peak just above 90.50 in US trading.
Sterling
Sterling held above 1.50 against the dollar ahead of the US employment data on Friday and found support below this level following the US release. There was evidence of short covering following aggressive selling earlier in the week which provided some fresh support later in the US session with gains to around 1.5120 against the dollar.
There were no major data releases during the day as markets tended to focus on the US data with the producer prices data not having a significant impact. The latest opinion polls will be watched closely over the weekend and any further evidence of a tight contest at the general election would tend to undermine support for Sterling on fears of delays to budget tightening, although the impact may be measured after recent selling pressure.
The UK currency will also tend to gain some support from any general improvement in global risk appetite.
Swiss franc
The dollar was unable to sustain gains above 1.08 against the franc during Friday and drifted back to the 1.0750 region later in the US session with some paring of long US currency positions.
The Euro was unable to make any headway against the franc despite an improvement in confidence surrounding European debt and this will cause some unease for the Euro.
Markets will be cautious ahead of the National Bank policy meeting next week with uncertainty as to whether the bank will maintain a commitment to preventing franc gains.
Source: VantagePoint Intermarket Analysis Software
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Australian dollar
The Australian dollar found support close to the 0.90 level against the US dollar on Friday and was able to make a significant advance in US trading with a peak near 0.9090.
The US currency was generally weaker while there was an improvement in risk appetite which helped improve confidence. There was also relief that there were no aggressive Chinese tightening measures ahead of the weekend which help cushion the Australian currency.
