by Korman Tam
The dollar climbed higher against the majors on softer US economic reports, pushing the euro to 1.4245 and the Loonie toward 1.1072. Weekly jobless claims were unchanged from the previous week, missing forecasts for a decline to 560k, instead holding steady at 570k. Meanwhile, the August non-manufacturing ISM figure improved by more than forecast, edging up to 48.4 and beating estimates for an increase to 48.0 from 46.4 in the previous month.
The key highlight for this week will be the August labor data, scheduled for release at 8:30 AM on Friday. The market expects the August unemployment rate to creep up to 9.5% from 9.4% in July. The non-farm payrolls are expected to improve further to post a loss of 230k jobs, compared with 247k jobs shed a month prior.
The G-20 Finance Ministers meeting kicks off this weekend in London. US Treasury Secretary Tim Geithner had prefaced the meeting yesterday, saying “this is a stock-taking meeting not a new-initiatives meeting”, adding that “the important thing to do is to try to figure out what cooperative framework or phased differentiated withdrawal of support is going to be appropriate”. The agenda seems to be focused on European government curbs on banking bonuses.
The euro drifted lower against the greenback, sliding to 1.4237. The ECB left monetary policy unchanged when it announced its decision earlier in the session, keeping rates steady at 1.0%. In the subsequent press conference by Bank President Trichet, he stressed that current interest rates remain appropriate, with inflation to remain subdued. Moreover, he said that there are increasing signs that the global recession is bottoming out and global policy stimulus should support growth. Trichet suggested that interest rates will likely remain unchanged for the medium-term, emphasizing inflation expectations are firmly anchored and that risks to growth outlook and inflation expectations remain balanced.
EURUSD holds steady near 1.4240, with support seen at 1.42, backed by 1.4160 and 1.4130. Subsequent floors are eyed at 1.41, followed by 1.4050 and 1.40. On the upside, resistance is seen at 1.4270, followed by 1.43 and 1.4350. Additional ceilings are eyed at 1.4380, backed by 1.44 and 1.4440.
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