Nov 08 2013

GDP Boosts Fed Taper Bets and Dollar Holds Gains Before Jobs Data

The U.S. currency headed for a second weekly gain against the euro as a Bloomberg measure of U.S. economic surprises inverted positive for the first time in almost a month.

The dollar held gains against most major peers before a U.S. jobs report today and after data yesterday showed the economy expanded more than forecast, fueling bets for an earlier taper in Federal Reserve stimulus. The euro was set for a second weekly loss versus the yen after the European Central Bank unexpectedly cut interest rates to a record yesterday.
Richard Grace, the Sydney-based chief currency strategist at Commonwealth Bank of Australia said, “The Fed is much closer to the end of its easing cycle than the rest of the major central banks and the surprise cut by the ECB confirmed that broader prognosis. We would stay with a firmer U.S. dollar view.”

The dollar was little varied at $1.3414 per euro as of 11:11 a.m. in Tokyo from yesterday, when it touched $1.3296, the strongest level since Sept. 16. It has fallen 0.5 percent versus the yen since Nov. 1, while Japan’s currency has gained 1 percent over the euro.
The Bloomberg ECO Surprise Index rose to 0.004 yesterday, the first positive reading since Oct. 11. The gauge shows the degree to which economic analysts under- or over-estimate the trends in the business cycle.
The dollar has risen 0.5 percent against the euro this week, following a 2.3 percent rally last week. The greenback bought 98.21 yen from 98.09. Japan’s currency traded at 131.74 per euro from 131.63 in New York, when it gained 1.3 percent.  

Rate Range Projection by Bank 

Next  week           96.00 -  99.00

Next 3 months      90.00 - 103.00

 

The market is watching how the US Job data ( Unemployment ratio ) which will be announced tonight. 

But in most cases  a non-taper of QE3 is expected so that current situation likely remaining.