The Forex Daily Digest – July 2, 2009

As stocks in the U.S. began the new quarter with stable gains, market analysts are pointing to an indecisive economic climate in expressing their predictions for just how the market will do in the second half.

The Non-Farm Payrolls report showed a loss of 467,000 jobs in June, the unemployment rate rose and hourly earnings stagnated. These numbers are offering very few bits of data that the Obama administration’s stimulus package is helping the weak labor market. The payroll decline was more than forecast and followed a 322,000 drop in May. The jobless rate jumped to 9.5 percent, the highest since August 1983, from 9.4 percent.

And first-time claims for state unemployment benefits declined in the latest week, almost entirely reversing the gain from the previous week. Initial claims in the week ending June 27th fell 16,000 to 614,000, which was pretty close to the consensus estimate expected by analysts.

There were some important economic figures released earlier today in Europe. The jobless rate across the Euro zone rose more than expected to 9.5% in May, climbing to a 10-year high as the recession continues to take a toll on the euro zone. The unemployment rate increased to 9.5% in May; that’s up from 9.3% in April. Economists had expected a rise to 9.4%. The unemployment rate was 7.4% in May 2008.

Meantime, the European Central Bank offered no surprises today, when it decided to leave its key lending rate unchanged at an all-time low of one percent. Economists expected the ECB to leave the key rate right where it was, with policy makers enthusiastic to measure the impact of last week's enormous injection of 442.2 billion euros of liquidity into the euro-zone money market, on top of the upcoming purchases of covered bonds. The central bank for the 16-member euro region has been reticent to follow the examples of the U.S. Federal Reserve, Bank of England and Bank of Japan, which have all lowered their main rates to close to zero and are purchasing government and corporate bonds to help their economies grow.

The euro continued its decline against the dollar ahead of the decision, with currency traders focused on the release of U.S. June labor market data. The euro traded at $1.4072 in recent action, down 0.6% on the day.

The USD increased after China said the U.S. currency may continue to dominate global trade and ruled out any “sudden” changes to its foreign-exchange reserves. The dollar gained versus the Australian dollar, yen and Swiss franc after the deputy head of the international payment department at the Chinese State Administration of Foreign Exchange, said that that the USD may maintain its status as the world’s reserve currency.

The CAD fell, following June’s decline, as crude oil fell below $68 a barrel before a report today that may show the U.S. unemployment rate climbed to the highest since 1983.

U.S. equity markets will be closed on Friday in observance of Saturday's July 4th holiday. If your plans are to take you away for the July 4th holiday, do be careful on the highways. Make sure you keep up to date with the very latest from the JDfn trading professionals who constantly offer you information from around the globe to help you in your Forex trading. Hope you all have a very happy and safe Independence Day holiday.

Happy Trading and Happy 4th of July,

James Dicks