Currency Briefing - what you need to know for Thurs May 3, 2012

The local currency fell back onto the $1.24 threshold, with the US dollar trading higher against all of the major currencies despite weaker economic data.

IG Markets Singapore said:

The Singapore dollar has slipped against the Greenback, falling back onto the $1.24 threshold as risk off sentiment made its way back into the marketplace.

The local currency is currently trading at $1.2399 this morning as traders make a flight to safety back to the greenback.

Weaker-than-expected US jobs figures were released last night which took the steam out of the May momentum.

Earlier this week the Singapore dollar had strengthened as investors took on more risk as firmer manufacturing data from the US and China lifted sentiment.

The currency pair is likely to stay in a tight range hovering around $1.24 before the release of Singapore’s PMI data out tonight.

GFT meanwhile reported (for 2 May 2012 trading):

The U.S. dollar traded higher against all of the major currencies despite weaker economic data. The focus will be on the ECB meeting tomorrow but non-farm payrolls will also garner some attention.

Leading indicators for NFPs are beginning to come out and according to the latest reports, the odds favor a weaker release. According to private payroll provider ADP, U.S. companies added 119k jobs to their payrolls last month compared to a downwardly revised 201k. Although ADP has a poor record of tracking non-farm payrolls, the decline in employment change is consistent with the rise in jobless claims.

Interestingly enough however, economists are still looking for payrolls to rise more in April compared to March. The current forecast is for payroll growth of 161k and the overriding argument is that even though all signs point to weaker labor market conditions, the absolute level of jobless claims is consistent with 150k-160k payrolls.

RBS, on the other hand, noted (for 2 May 2012 trading):

The risk-averse trading environment took hold during the European morning after EU PMIs broadly surprised to the downside.

In particular, German unemployment and PMI data in April were very poor. These data come directly ahead of the ECB rate decision and we expect the ECB to express more caution on the growth outlook and remove phrases about near-term inflation risks, a balance that could play EUR negative.

Whether this could be a catalyst towards our long anticipated break lower in EUR/USD and EUR crosses remains to be seen. We currently hold short-EUR exposure vs. the GBP, USD, and CAD.