Daily currency report
Overview
While the BoJ decided to try and match the size of the Federal Reserve’s vast monetary easing programme, solid US jobs data will likely bolster views the US central bank will soon move to tighten its monetary policy; a bullish signal for the US dollar which was also outlined by the Federal Reserve’s Janet Yellen. European Central Bank President Mario Draghi restored the euro’s credibility in his news conference, helping the euro rebound from fresh lows. However, the euro’s near-term outlook remains uncertain after he suggested the ECB will consider non-standard monetary easing tools amid signs of stress in the euro area economy.
Sterling
Sterling recovered from an earlier fall against the US dollar and may continue to find support around current levels after data on Britain’s key services sector strengthened hopes of UK economic growth, while the Bank of England decided that its monetary policy needed no adjustments this month. PMI data showed Britain’s services industry expanded in March at its fastest pace in seven months, lifting sterling on optimism that the UK economy will return to growth this quarter and avoid another economic recession.
US dollar
Data on US non-farm payrolls, due for release, are forecast to show an increase of 200,000 in March; a number within a range considered enough to bring the country’s unemployment down towards the Federal Reserve 6.5 per cent target. However, Ms Yellen’s comments came after US weekly jobless claims rose to a four-month high, pushing the US dollar lower on suspicions that the Federal Reserve will not budge from its $85 billion-a-month stimulus anytime this year.
Euro
The euro jumped by as much as 1.7 per cent after hitting a new four-month low against the US dollar after European Central Bank President Mario Draghi again mended confidence in the single currency with new reassuring comments. Facing questions after the ECB announced no changes to its monetary policy for this month, Draghi warned investors not to underestimate the political strength of the euro area and reaffirmed his “whatever it takes” pledge. Still, the euro had been under pressure leading up to the policy decision amid mounting concerns about a deeper recession in Europe. The single currency may come under similar tension before the next policy meeting in May after Draghi hinted that the ECB was looking at non-conventional monetary stimulus measures to help support flagging economic activity.