OPENING COMMENT
Lack of any data in the Asian session of trade has left the markets trading within some very tight ranges ahead of the much anticipated NFP release due out in the US later today. The New Zealand Dollar is the strongest currency on the day thus far, while the Canadian Dollar lags, despite the recent rebound in commodity prices. Later today, traders will also be focused on the Canada employment data. It seems as though one of the things that has become quite clear this week, is that most central banks are not yet ready to start to remove non-standard monetary policy measures and look to raise interest rates from historically low levels.
We saw this with the RBA earlier in the week, and this was followed up by a dovish Riksbank and European Central Bank, with Trichet saying that “today” was not the time to exit from enhanced credit support. Dallas Fed Fisher has also been on the wires dampening any prospects of a quick recovery, saying that the US is likely to enter a sluggish period of growth, while also conceding that is too early to comment on the timing and pace of Fed rate hikes. On the whole, there is a general sense of cautious optimism. Central banks can see the light at the end of the tunnel, but so not want to turn their headlights (stimulus and accommodation) off just yet.
Elsewhere, global equity price have been weighed down somewhat on elevated geopolitical concerns, after North Korea has announced that it is weaponizing plutonium and is in the final stages of enriching uranium. The WSJ reports that this is in response to the UN Security Council move to tighten sanctions against North Korea after it tested nuclear bombs in June. Looking ahead, the European session should be quiet, with the only slightly compelling releases coming from Swiss CPI (-0.7% expected) due at 7:15GMT, followed by the release of the European Commission forecasts at 9:45GMT. This could however be a very volatile session of trade with the US markets getting set for a holiday weekend.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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