Even though the euro was weighed by worries about Spain’s high debt level the EUR/USD gained on Friday in thin trading after sharply lower-than-expected U.S. jobs figures bolstered views the Federal Reserve could yet ease policy further to boost the world’s biggest economy. The data showed that U.S. Non-farm payrolls rose by 120K in March, far lower than the 203K expected in a survey. The data were especially disappointing after recent numbers suggested a stronger recovery in the beleaguered jobs market. The question for the dollar is whether this is as viewed as an outlier in an otherwise improving trend in labor markets, or if it’s viewed as enough to revive talk of another round of Fed policy easing. Monday’s price action will be a lot more telling as participants in the U.S. and abroad digest this jobs data.
The lack of growth incentives on a EU-wide level is still the biggest concern for Europe and the European Central Bank may be challenged to provide additional stimulus to alleviate the strains from austerity measures. Senior currency analyst at Bank of Tokyo-Mitsubishi, Sumino Kamei said “I’m negative on the euro. It’s likely to keep extending losses below $1.30 as there’s no event that could stop its decline amid worries over Spain”. Concerns about slower growth in the United States and China, along with a revival of worries about the euro-zone debt crisis, have reduced appetite for stocks. However the greenback may be stronger because risk aversion is creeping back in again.
Meanwhile, GDP, inflation and trade balance data due next week from China, the world’s second largest economy, deterred investors in Asia from taking fresh positions at the end of the week. Investors will also focus on the headlines regarding the eurozone crisis. Japanese Finance Minister Jun Azumi told Japan and China will seek to coordinate on supporting the International Monetary Fund’s effort to contain Europe’s debt crisis. This still needs careful monitoring and we can’t yet become optimistic. He said “Europe’s crisis hasn’t ended even as the situation improves from last year. Rather than make decisions independently, we’ve agreed to consult each other very closely”. The firewall which European nations presented in March is not convincing enough to give momentum to discussions for other countries’ financial contributions to the IMF.
According to the Commodity Futures Trading Commission, speculative investors trading on the Chicago Mercantile Exchange cut back their bets the dollar would rise against the euro and yen. Investors’ net short euro and yen positions, shrank as of April 3, compared with a week earlier, the government regulator’s commitment of traders report showed Friday. Net euro short positions declined 11% to $13.1 billion, while net yen positions fell 3% to $9.8 billion as of April 3. Against seven major currencies, speculative investors held a net long dollar position totaling $17.3 billion. That was a 10% decline from the previous week.