USD Trading Subdued, Labor Data Looms

By: Barbara Zigah

The U.S. Dollar steadied in Asian trade versus both the Japanese Yen and the Euro but could be under significant pressure if today’s U.S. Non-farms data disappoints as it did in March. As reported at 2:10 p.m. (JST) in Tokyo, the EUR/USD pair was trading at $1.3150, while the USD/JPY pair was trading at 80.18 Yen; trading in the U.S. Dollar is expected to be subdued until after the NFP report later today. While analysts are expecting an increase in new jobs from March’s 120,000 to 170,000, any disappointment could give rise to speculation that the U.S. Federal Reserve Bank will provide additional easing measures to ensure that the employment portion of its dual mandate is satisfied.

Yesterday, the Euro recovered from earlier losses when the European Central Bank left both policy and interest rates unchanged; markets had been hopeful that there would be at least a hint of additional future easing but the ECB head, Mario Draghi, said that in the opinion of the ECB members the effects of the recent LTRO had still not entirely been felt. The Euro is likely to be under some pressure into the weekend as France prepares to elect a new president; if the incumbent Nicolas Sarkozy is not reelected, it is very likely that the Euro could see a major downward movement on worries that the new president could seek to break several of the recently agreed E.U. treaties, which would leave open the door for other E.U. members to follow suit.