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FX round-up: Dollar gets a lift

Date: Friday 05 Mar 2010

The dollar strengthened against its rivals Thursday following unexpectedly weak US home sales data which raised concerns about the speed of recovery.

Doubts about whether Greece’s austerity measures will actually work also helped the greenback even though European Central Bank (ECB) president Jean-Claude Trichet called then “convincing”.

Greek unions have responded angrily, calling strikes for Friday, while some trade unionists occupied the finance ministry preventing access. Germany’s Angela Merkel and Greece’s Papandreou meet in Berlin later to discuss next steps.

The ECB predictably left rates unchanged after eurozone fourth quarter GDP growth was confirmed at 0.1%, maintaining that rates remained at the appropriate level.

Britain’s central bank also left borrowing costs and quantitative easing unchanged, which, given the somewhat better data seen over the past few days, was pretty much expected.

US data was a bit of a mixed bag ahead of today’s employment report with existing home sales unexpectedly falling 7.6%. But the market shrugged this off after factory orders rose 1.7%, while the weekly jobless figures came in pretty much as expected at 469K.

Traders also liked gains in US productivity and fall in unit-labor costs, which indicates slowing price pressures.

Both the UK and US have key data announcements Friday, with UK producer prices expected to hit a 14 month high of 4.1% fro February. The monthly figure is expected to show an increase of 0.3%. In the US, non-farm payrolls are seen down between 65k and 30k. The unemployment figure is expected to remain unchanged at 9.7%.

Given Wednesday’s ADP data, which surprised on the upside for February, there’s hope that the jobs number could surprise on the upside, though there may be a revision lower of the January figure, as there was on the ADP data.

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