FOREX weekly review (03.06 – 07.06.2013)

The euro rose against the U.S. dollar last week as the European Central Bank kept its benchmark rate unchanged and ECB President Mario Draghi offered no sign that officials were sold on a further easing of monetary policy in the near term.

Weekly U.S. jobless claims fell by 11,000 to a seasonally adjusted 346,000 for the week ended June 1, roughly in line with expectations.

According to the Fed’s Beige Book U.S. economy is still growing at a "modest to moderate" pace seen so far this year, with only a few scattered reports of weakness stemming from federal government budget cuts, the Federal Reserve said Wednesday. The so-called Beige Book released by the Fed, covering the period from early April to late May, seems very close to the tone of the last two Beige Books. The Dallas Fed was the only outlier of the 12 Fed districts, reporting "strong" economic growth.

Euro eased agains the dollar as Payrolls in the world’s biggest economy rose 175,000 in May after a revised 149,000 increase in April that was smaller than first estimated, a report from the Labour Department showed. The median forecast  called for a 163,000 gain last month. The unemployment rate rose to 7.6% from a four-year low of 7.5% as more Americans entered the labour force.

Fed Chairman Ben S. Bernanke in May suggested the central bank could curtail its bond buying if the job market improves in a “real and sustainable way.”

In Germany, the Bundesbank cut its forecasts for growth in Europe’s largest economy for this year and next. The Frankfurt-based central bank reduced its 2013 growth projection to 0.3% from the 0.4% predicted in December, and said the economy would expand by 1.5% in 2014, compared with the previous estimate of 1.9%.

EURO:

The ECB President Mario Draghi addressed the euro-zone economy at his monthly news conference. He said ECB staff cuts its forecast for 2013 to a 0.6% fall in gross domestic product versus a March forecast of a 0.5% contraction. The staff, however, lifted the 2014 forecast to 1.1% growth from 1%.

The projections came after the ECB left its key lending rate unchanged at a record low 0.5% and made no changes to the deposit rate.

Data released showed German manufacturing orders dropped 2.3% in April month-on-month, falling short of analyst expectations of a 0.9% decline.

POUND:

The pound extend gains helped in part by the recent release of upbeat economic data out of the UK.

In the United Kingdom, the Markit Services PMI (May) came in at 54.9, exceeding projections that called for 53.0, and up from 52.9 previously.

The Bank of England left interest rates at a record low of 0.5%, and kept its asset-buying plan at 375 billion pounds ($579 billion).

Tuesday’s report showed UK PMI Construction rose to  50.8 in May after 49.6  expected and 49.4  in April.

YEN:

The yen strengthened versus the dollar and euro as Prime Minister Shinzo Abe failed to provide additional detail on stimulus measures and as speculation intensifies about Federal Reserve’s path of monetary stimulus.

COMMODITY CURRENCIES

AUSSIE: Aussie initially fell after weak trade data. Australia’s dollar declined Wednesday following disappointing domestic data in Australia, including GDP missing estimates of +2.7% increase y/y posting a final +2.5%, down from previous at 3.1%.

Australia’s dollar dropped versus the yen, set for its worst weekly rout since 2011, before Chinese data tomorrow forecast to show growth in imports slowed, dimming the demand outlook for commodities.

LOONEY:

Canada’s dollar gained against its U.S. peer as the nation’s employment rose by 95,000 in May, the most since August 2002. The jobless rate fell to 7.1 percent from 7.2 percent even as more people joined the workforce, Statistics Canada said in Ottawa.

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