The US dollar fell significantly on Wednesday and showed the lowest decrease for two weeks amid weak labour market data, continuation of the US government shutdown and unsolved budget issues and national debt limit increase. The euro rocketed on the back of the ECB governor Mario Draghi’s press conference and political tensions decline in Italy after Italian government got a confidence vote in the upper house of the parliament.
The White House and congressmen prepare for a long battle over the budget and continue exchanging accusations due to the shutdown of federal institutions without having started real negotiations on a compromise over the budget. According to The Wall Street Journal, the fact that lawmakers and the White House show no rapprochement increases the probability that the present crisis can turn into a more profound confrontation around the US national debt limit increase.
Due to the shutdown of statistical offices the only source of macroeconomic data in the USA became nongovernmental agencies. On Wednesday ADP data were released which showed a considerably smaller growth of employment change than expected, - which reduces the probability of QE3 tapering. FOMC Member Eric Rosengren also said on Wednesday that stimulus measures shouldn’t be tapered off prematurely.
ADP Employment Change rose to 166 thousand in September with the forecasted growth to 180 thousand. Prior month data were significantly revised downwards from 176 thousand to 159 thousand. ADP Non-Farm Payrolls on Wednesday, which is often considered a leading indicator of the official report, drew a greater attention of the market because of the fact that on Friday the official report of the Labor Department probably will not be published.
The ECB left the key interest rate on Wednesday unchanged at 0.5% per annum as it was expected. The euro had rocketed and reached 8-month high Vs the US dollar after the press conference of the ECB president Mario Draghi – investors regarded his comments as a sign that the central bank wouldn’t perform extra stimulation of the region’s economy which could put pressure on the euro. Draghi answered the question whether the euro rate was too high that the exchange rate was not a policy tool. The government of Italian Prime Minister Enrico Letta got a vote of confidence on Wednesday in the upper house of the parliament after the former Prime Minister Berlusconi decided to support the ruling coalition.
The pound was traded upwards despite a slight decrease of Construction PMI in the UK. Construction PMI dropped to 58.9 p. in September from the record reading for 6 years 59.1 p. seen in August against expected growth to 59.5 p. Meanwhile, Residential Construction reached the highest level since November, 2003 – 64.8 p. MPC Member Paul Fisher said on Wednesday that providing monetary policy Forward Guidance favored UK economic recovery.
New Zealand dollar rose after a tough statement of the Reserve Bank of New Zealand Governor Wheeler who said that in order to restrain inflation pressure and housing price increase – official interest rate could rise by 2% during 2014 – 2016. Interest rate can be raised even more significantly if the rules of mortgage lending don’t slow down housing prices.
Australian dollar was traded downwards on Wednesday amid weak macrostatistics data. Building Approvals in Australia fell by 4.7% m/m in August, which turned out considerably higher than forecasted decrease by 0.5%. Australian Trade Deficit in August fell less than expected to 0.815 billion AUD while its decrease to 0.4 billion AUD was expected.Publication source