By Omer Esiner of Travelex
The dollar was generally steady in overnight trade as investors across much of the world wound down activity ahead of tomorrow's Good Friday holiday.
The U.S. jobs report for March, due out tomorrow morning, is also keeping many market participants from placing big bets on major currency pairs.
The greenback remains well off last week's 10-month trade-weighted peak after moderating sovereign credit concerns in the eurozone reduced some of the dollar's safe-haven appeal.
Automatic Data Processing
jobs data undermined some of the market's optimism leading up to tomorrow's nonfarm payrolls report and kept the greenback under some pressure.
Investors will look to tomorrow's employment figures for direction on U.S. monetary policy and the dollar. A steep rise in payrolls -- they're forecast to have risen by around 190,000 last month -- would revive speculation about
policy normalization sooner than previously expected and likely see the greenback retest recent highs.
Data overnight showing stronger-than-forecast manufacturing sector activity in the eurozone, the U.K. and Switzerland failed to meaningfully move markets ahead of the long holiday weekend and the event risk of the U.S. jobs report tomorrow. The New Zealand dollar tumbled across the board after an IMF report said the kiwi was 10%-25% overvalued.
: Weekly jobless claims fell by 6,000 to 439,000, in line with expectations for 440,000. Continued claims remained stubbornly high at 4.66 million, however. The data were consistent with a jobs market that is improving, albeit at a very gradual pace. The greenback was mostly unchanged near the middle of its intraday ranges after the data. Investors were awaiting the March Institute for Supply Management manufacturing report as well as construction spending data later in the morning.
: The single currency held steady against the greenback but fell against the broadly stronger Canadian dollar overnight. Investors were hesitant to place any major bets ahead of the long Easter weekend (most of Europe is closed on Friday and Monday) and before the event risk of tomorrow's U.S. employment report for March.
Data showed solid improvement in eurozone manufacturing activity in March, with the 16-member bloc's PMI rising to 56.6, above the 56.3 expected and its fastest rise in more than three years. A steep rise in exports helped push Germany's PMI to 60.2 last month, its highest level since April 2000. Separate data showed a 0.4% month-over-month decline in German retail sales in February.
The reports were largely consistent with the mixed recovery in the eurozone, which has been characterized by generally soft domestic demand but strong activity in exports. The EUR will likely remain vulnerable to continued sovereign issues and lagging ECB policy tightening.
: Data showed a jump in manufacturing activity in the U.K. in March, with the PMI rising from 56.5 to 57.2, better than the 56.8 expected.
Although the good economic news fueled some paring back of bets against the pound, the currency got a bigger boost from the latest poll ahead of the very close general election next month.
A poll by Metro/Harris showed the opposition Conservatives had a 10-point lead over the incumbent Labour Party, enough to give them an overall majority and avoid a hung parliament. Investors worry that political gridlock will undermine any government's ability to enact much-needed fiscal reforms to bring the U.K.'s massive budget deficit down. The pound should draw additional near-term support from news that reduces political uncertainty.
: The New Zealand dollar tumbled across the board, posting its largest one-day slide against the Aussie on record, after the IMF said that the kiwi was around 10%-25% overvalued. The IMF's report said that while New Zealand's economy had recovered from recession thanks to appropriately loose monetary and fiscal policy, the run-up in the nation's currency was greatly overdone. The IMF said, however, that the NZD's strength could prove temporary as central banks abroad begin to raise rates, which would eat into the NZD's current yield advantage.
: The Mexican peso rose to a 17-month peak against the greenback after
said the nation's MXN-denominated bonds were eligible to be included in its World Government Bond Index (WGBI). The move would make Mexico the first Latin American nation to enter the Citi's WGBI and would add to capital flows from investment funds into Mexican markets.
Omer Esiner serves as the Senior Currency Market Analyst at Travelex, Inc. a global financial institution specializing in corporate foreign exchange services and international payment solutions. In this capacity, he monitors, analyzes and interprets the economic, financial, political and technical factors that drive the movements of more than 100 currencies for Travelex. Mr. Esiner explains the currency markets' reaction to market events to clients, employees and members of the media.
You can view his daily reports, recording briefings, and quarterly reviews posted
. As an expert in foreign exchange, Mr. Esiner is quoted regularly by the financial media including The Wall Street Journal, CNN, Dow Jones Newswires, Reuters, the Nightly Business Report, National Public Radio, among others. Based in Washington, D.C., Esiner joined Travelex in February 2000. Prior to his current position, Esiner was a currency trader for several years. Mr. Esiner holds a bachelor's degree in economics from the University of Maryland, College Park. He is fluent in Turkish and proficient in Spanish.