Market Review - 05/06/2013 22:28GMT

Dollar falls on weak U.S. private jobs data

The greenback weakened against other currencies on Wednesday as weak U.S. ADP employment and factory order implied that the Federal Reserve is unlikely to reduce its stimulus program in near future. The Japanese yen strengthened broadly as Japanese Prime Minister Abe failed to provide further details on stimulus measures.

Versus the Japanese yen, although the greenback rose swiftly to 100.47 in Asia after to Japan PM Abe's initial comments, the pair fell sharply to 99.38 at Asian midday as his speech lacked any ambitious growth measures. Later, despite brief recovery to 99.98 in European morning, price dropped again to 99.12 in New York after release of weak U.S. ADP employment(135K versus the forecast of 165K). Dollar eventually hit session low of 98.97 after the release of U.S. ISM non-manufacturing and factory order before staging a recovery in U.S. afternoon.

Japan Prime Minister Abe said 'will thoroughly remove all barriers to corporate activity; to set up special strategic zones; will triple public-private infrastructure investment; triple investment to 12 trillion yen in next 10 years; will increase per capital income by 3% a year; will aim to boost power related investment to 30 trillion yen over next 10 years.'

U.S. ISM non-manufacturing PMI in May came in at 53.7, better than the forecast of 53.5. U.S. factory orders in April came in at 1.0%, weaker than the forecast of 1.5%, previous reading is revised to -4.7%.

Although the single currency rose initially to 1.3107 at Asian midday, cross selling of euro versus yen pressured the pair and price dropped to intra-day low at 1.3053 in European morning after the release of eurozone retail sales, which came in at -0.5% m/m and -1.1% y/y, worse than the expectation of -0.1% and -0.8%. However, dollar's broad-based weakness due to the weak U.S. ADP employment pushed the pair above Monday's top at 1.3108 to 1.3118 in New York morning.

Earlier in European morning, the single currency was pressured after the release German and eurozone Service PMI in May, which were released at 49.7 and 47.2, worse than the expectation of 49.8 and 47.5.

The British pound edged higher from Asian low at 1.5290 and rose to 1.5373 in European morning due to much better-than-expected Markit U.K. Services PMI in May which came in at 54.9, versus the forecast of 53.0. Later, dollar's weakness pushed the pair further higher to 1.5398 in New York morning and then a 3-week top at 1.5409 in U.S. afternoon.

U.S. Fed released its beige book and it stated that ' U.S. economy expanded modest to moderate pace since mid-April report; hiring increased at a measured pace in several Fed districts; U.S. residential real estate n construction activity expanded at "moderate to strong" pace in most Fed districts; manufacturing expanded in most Fed districts since prior report.'

Data to be released on Thursday :

Australia trade balance, CPI, UK Lloyds employment confidence, BoE rate decision, QE total, Germany factory orders, ECB rate decision, U.S. jobless claims and Canada Ivey PMI.