US jobs data prevails in the market - 6.1.2011

The dollar has been traded in a narrow range against the euro and the yen after it rocketed with positive U.S. economic data. The growth was caused by better than expected jobs data and ISM non-manufacturing composite index – ADP showed that private sector jobs rose by 297 000 in December in comparison to its expectations of 100 000.

The euro fell to 1.3150 against the dollar from 1.3280 on Wednesday. EUR/USD traded 1.3130-1.3170, USD/JPY – 83.25-83.38 during the asian session. S&P 500 rose 0.5% to 1276 yesterday and Dow Jones Industrial Average increased 0.3% to 11722 while asian stock markets were mixed Thursday.

Higher U.S. ADP jobs data increased expectations that the U.S. non-farm payrolls may also be stronger on Friday. Such high expectations support positive economic outlook of the U.S. Economy. “The economy is in recovery, although at a moderate pace,” said the President of the Federal Reserve Bank of Kansas City Thomas Hoenig. Hoenig’s economic outlook has U.S. gross domestic product growth coming in between 3.5% and 4% over the next couple of years, in a pace he described as “moderate.”

Up next today the U.S. initial jobless claims as well as continuing claims, which are probably to give additional support to dollar if the data outperforms expectations.

EUR

The euro is under pressure this morning because of the weight of positive US economic data. Despite recent promises of China to buy more European government bonds, fears over debt issues in Spain, Ireland and Portugal are still affecting the market. The Swiss National Bank stopped accepting Irish government bonds as collateral in its money market operations, a move that also dented sentiment toward the euro. A spokesman for the SNB said that only "securities that fulfil stringent requirements with regard to credit rating and liquidity are accepted as collateral by the National Bank."

Portugal successfully sold €500 million ($664.9 million) of six-month treasury bills Wednesday, but at sharply higher yields than in its September tender, as the week's most anticipated debt sale signaled that investors remain worried the country may yet need a bailout. The Portuguese treasury paid an average yield of 3.686% on the six-month Treasury bills, compared with 2.045% at the previous tender on Sept. 1, for the same maturity.

As for the economic data consumer, services, industrial confidence indexes, retail sales and business climate indicator are to be published today in the Euro-Zone.