ForexNewsNow Daily Market Outlook for February 4th, 2011

NEW YORK (Forex News Now) – Daily Market Overview – The daily forex news reported the U.S. Dollar firmed against most other major currencies on Thursday. With the exception of the Australian Dollar, the Greenback was resilient against the other majors.

The Australian Dollar rose sharply after the release of the RBA’s Monetary Policy Statement in which the central bank raised its projections for growth in Australia for 2011 from 3.75% made in November, to 4.25% despite massive flooding in Queensland last month.

In European currencies, EUR/USD analysis showed the rate declined sharply on Thursday after the ECB left rates at 1.0% as widely expected, and comments by ECB chief Jean-Claude Trichet that the central bank had no intention of raising rates from their record low levels. Sterling, on the other hand, rose early in the session after news that U.K. PMI beat expectations, only to fall later in the trading day.

The Greenback held steady against the other currencies, rising marginally against the Canadian Dollar and virtually unchanged against the Japanese Yen and the New Zealand Dollar. The Kiwi dropped sharply in late trading on Wednesday due to negative employment data with the New Zealand Unemployment Rate jumping to 6.8% from 6.4%.

The price of gold rose sharply on Thursday due in part to continued tensions in Egypt. The precious metal rose over the $1,350 psychological level to $1,354, while the price of crude oil was mostly unchanged at $90.86 per barrel.

February 3^rd Important Forex Developments:

1. EUR/USD Sharply Lower on ECB Rate Decision and Trichet Comments – After the ECB left the benchmark Minimum Bid Rate at 1.0%, as widely expected, ECB chief Trichet stated that, “Inflation expectations remain firmly anchored, in line with our aim of keeping inflation rates below but close to 2 percent over the medium term.” The statements were taken as dovish by the market, with little chance of an ECB rate hike in the near future, which sent the EUR/USD rate sharply lower.
2. U.K. Services PMI Pushes Sterling To New Recent High – Cable traded as high as 1.6276, — a level not seen since December of 2009 — on Thursday after news that the U.K. Services PMI came in at 54.5, considerably better than the consensus of a 51.2 print. The number was at its highest level in eight months and gives further evidence that the U.K. economy is on the upswing, making a BOE rate hike more likely later in the year. Nevertheless, GBP/USD then sold off on profit taking and is at the 1.6157 level in early Friday trading.
3. ISM Non-Manufacturing PMI and Jobless Data Gives the USD Support – ISM Non-Manufacturing PMI came out at 54.5, significantly higher than the 51.2 expected and the best reading since 2005, while Initial Jobless Claims dropped to 415K versus an expected 420K. Both numbers added to the U.S. Dollar’s strength against other currencies.
4. Aussie Sharply Higher on RBA Monetary Policy Statement – AUD/USD rose sharply after the RBA released its Monetary Policy Statement. The statement noted that the record flooding in December will “have a material effect on the near-term profile of gross domestic product, with growth in the December and March quarters notably lower,” Nevertheless, the central bank continued that “a strong recovery in the June quarter as coal production picks up and the rebuilding effort gets under way.”
5. Disappointing Eurozone Retail Sales – EUR/USD analysis shows the rate was negatively affected by a dismal Retail Sales report, which had EZ Retail Sales dropping -0.6%, significantly worse than the consensus of a +0.4% increase the market was anticipating.

February 4^th Forex Events for Traders to Watch

1. U.S. Non-Farm Payrolls – One of the most influential numbers for the forex market, the U.S. Non-Farm Employment Change inevitably adds volatility to the entire forex market. This month’s number is expected to show the U.S. economy added 137K jobs. A favorable number will most likely fuel a rally in the U.S. Dollar.
2. U.S. Unemployment Rate – Along with the Non-Farm Payrolls number, the U.S. Unemployment Rate also impacts the forex market; however not to the same degree. The U.S. Unemployment Rate is expected to rise to 9.5% from 9.4%.
3. EU Economic Summit – Officials and heads of state will be meeting in Brussels to discuss the Euro, sovereign debt and other economic issues.
4. Canadian Employment Numbers – Canadian Unemployment is expected to stay steady at 7.6%, while the Canadian Employment Change is expected to be +18.9K.
5. The Price of Gold – The price of gold has just gone over the psychological $1,350 level. If continued unrest in Egypt persists, gold and oil will undoubtedly rally igniting inflation and prompting action from the world’s central banks.