The US dollar stabilised after a big rout knocked it to 10-week lows. The past several weeks have seen the US currency surrender steady ground as mixed signals on the health of the world’s top economy suggest the Federal Reserve would wait longer before boosting interest rates for the first time in many years. The Fed was once considered on course to raise rates by the middle of the year. But the economy’s weak start to the year, coupled with lacklustre news on hiring of late, has shifted the time frame to later in the year for higher US interest rates, taking a toll on dollar sentiment. Given the uncertain shape of the economy, markets hope to glean better insight into its underlying strength in the government’s monthly employment report. Forecasts call for US job growth of around 224,000 in April and an unemployment rate of 5.4 per cent. An outcome near or above forecasts would be dollar positive while a weaker print would leave the dollar poised for a faster pace of depreciation. Election Day in Britain found the pound modestly weaker with the vote seen as the closest in decades. US jobless claims are forecast to rise above 15-year lows.
Euro
The euro back-pedalled from 10-week highs against the greenback, but underlying sentiment remained fragile, highlighted by the smaller-than- expected improvement in German industrial orders. The euro has found a supporting cast in rising German bond yields, and the greenback’s turn for the uncertain. Still, Greece’s unresolved cash crisis should help keep the euro on an unpredictable path over the short run. The euro is still saddled with a generally bearish longer run outlook on the view its shaky fundamentals will continue to lag behind the US whose economy is expected to regain its bullish form over coming months which would allow the Fed to boost interest rates.
Sterling
The much-anticipated vote is considered the closest contest in decades. Incumbent David Cameron’s Conservative Party is seen in a footrace with Ed Miliband’s Labour Party for a majority stake in Britain’s 650-seat parliament. The outlook for sterling remains as muddled as the prospects for a timely verdict on who will occupy 10 Downing Street over the coming five years. Sterling is likely to adhere to its unpredictable path at least until the next administration can form a stable government which could potentially take days, maybe weeks. The longer political uncertainty flares, the more vulnerable the pound is seen.
US dollar
The dollar rebounded from a 10-week low against the euro after the latest jobless claims fared better than expected and suggested the labour market was holding up solidly in the face of an otherwise sluggish economy. Jobless claims have held below 300,000 for nine consecutive weeks, signalling a strengthening trend in the labour market.