American Weekly Fundamental Outlook, 05/13/13 to 05/17/13
For the coming week, anticipate another positive signal for the Greenback for the coming session, since most analyst are skeptic whether the Greenback strength is justified, since the broad based USD buying was the key topic since the US jobless claims gathered great optimism this Thursday. The USDJPY finally breached above the 100-resistance while the euro and sterling both faded on the speculation that the Fedmay taper the bond purchases before the end of the year. In addition, released this morning, the disappointing construction data further weighed on the negative sentiment in GBP trading. Today and through the weekend, the G7 finance ministers and central bankers will gather in London to discuss about the ways to boosts the growth and revive the economies.
Furthermore, with the recent strength of US Non-Farm Payrolls which climbed by 165k in April, beating market expectation of 140k. In addition, private sector hiring expanded by 176k, well-ahead of the consensus for 150k, while government payrolls declined by 11k. Revisions were very positive and with a net 114k to payrolls added the equivalent of another month of job growth. March payroll were revised up to 138k, while February’s were revised to a whopping 332k. On the other hand, unemployment rate dropped by 7.6% in March and unlike the decline in March, this one was for the right reasons. Household survey employment grew by 293k, and 210k workers entered the labor force. The labor force participation rate remained unchanged at 63.3%.
Consequently, the weekly jobless claims came in weaker than expected this Thursday, triggering a decent USD rally as the markets re-started talking about the tapering of bond purchases before the end of the year. The rumors on the Chinese interest in USD-denominated assets certainly reinforced the USD demand. Now this needs to be recapitulated as there has been a significant shift in sentiment regarding US economy’s health, however there has no significant justification in the recent data. Since the nonfarm payroll showed 148,000 decreases in March, meaning that the 165,000 printed in April showed little improvement in real term. The GDP registered 2.5% growth in the first quarter versus 3.0% expected and the inflation remains well below the target, while the manufacturing data across US were rather disappointing.
Consequently, the significant USD demand was clearly leaded by the massive Yen selling overnight. The JGB 10-year yields spiked to 0.6860 from 0.5900 levels in Tokyo. Now the question is it the inflows in US assetsare sustainable while no data gives support to such optimism yet. Is only a week improvement in jobless claims enough to erase the recent month weakness regarding the leading economic indicators?
Disclaimer The analysis we provide is based on the average estimate of price movements in one day. Does not guarantee what we deliver is actually a proper and correct. Everything that happens in the decisions you make on your trading transaction is to be Your responsibilities.
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