Better Than Expected US Jobs Data
Better than expected US jobs data has raised recovery hopes and triggered risk appetite putting pressure on the euro to dollar exchange rate. US data showed that the US lost 539,000 jobs in April, an improvement over March’s 699,000 job losses in the US. The US currently has an unemployment rate of 8.9%, a 25 year high.
Dollar at Six Week Low
Although the US figures pared some optimism, other economic data released during the week kept risk sentiment high affecting currency exchange rates. On Friday the dollar fell to a six week low against other major currencies. Melvin Harris of Advanced Currency Markets stated, “The market is positioning for recovery over the next few months, which means the dollar will clearly see considerable weakness as this plays out.”
Canadian Dollar Gains
The euro to dollar rate was up 0.8% from Thursday and the euro traded at $1.3505. Many analysts expect this trend to continue. The dollar to yen rate fell 0.3% to 98.91 and the British Pound rose 0.4% to $1.5095. The US dollar fell against the Canadian dollar as Canada reported an unexpected increase in jobs in April.
ECB Decisions
The euro to dollar exchange rate was also affected by the ECB’s decision to boost sluggish credit markets by purchasing covered bonds which are backed by a pool of assets on a bank’s balance sheet. Forex investors and traders hope the move will improve the troubled Euro Zone economy. Addressing the sluggish economy Nicole Elliott of Mizuho Corporate Bank stated in a note to clients, “While the economy may be getting worse at a slower rate, it is still in recession and unemployment is rising. Elliott also said that recovery will take a significant amount of time.
The results of US bank stress tests revealed no surprises and affected currency exchange rates as stocks rallied and investors sought out higher yielding currencies. Weekend trading will likely be dominated by risk appetite.
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