The yen’s slide towards four-year lows against the US dollar is providing the US currency with some much-needed support in other crosses following its own sharp fall. The greenback sank to a six-week low against the British pound with the latest US jobs data damaging views that strong employment in the economy will encourage the Federal Reserve to consider a smaller stimulus programme. Several members of the Federal Reserve, including Chairman Ben Bernanke, will be speaking this week and should offer markets plenty of guidance about future US monetary policy.
The Bank of England’s decision to hold fire on additional bond-buying has helped sterling extend its recent recovery.
The euro starts on higher ground, bolstered by European Central Bank announcement, but focus on the bad health of the eurozone economy is unlikely to abate.
Sterling
The Bank of England’s decision not to deploy new monetary stimulus at its recent meeting may come under pressure from data that is likely to highlight the difficulties facing UK manufacturers. Another set of worrying factory figures could hurt sterling by reminding investors that there is still plenty of evidence pointing the BoE towards looser monetary policy. However, forecasts in front of the release are positive, while data on UK house prices and retail sales should reinforce beliefs that Britain escaped a triple-dip recession and returned to growth last quarter.
US dollar
The US dollar suffered heavy losses after the latest US employment data completely missed estimates. Analysts had expected another month of strong jobs growth to bolster views the Federal Reserve would soon cut back on its stimulus agenda which is negative for the US currency. However, significantly weak non-farm payrolls figures, 88,000 in March against forecasts of 200,000, raised new question marks about the US economic recovery, pulling the US currency down sharply from earlier four-month highs against the euro.
Euro
Speaking after the European Central Bank made no changes to interest rates, President Mario Draghi assured markets that despite the Cypriot debacle the single currency’s durability should never be questioned. The warning provided short-term support for the euro; however, the currency’s longer-term outlook remains far from certain after Draghi also touched on using non-conventional monetary easing to help revive the 17-member economy.