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Daily Forex News September 12th 2013

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Daily Forex News September 12th 2013:

USD Midly Higher After Jobless Claims Falls 292,000 to Lowest Levels Since April 2006, But is it all a Computer Error?

The US Dollar is mildly higher in the early US session after data showed initial jobless claims dropped more than expected to 292,000 in the week ending September 7th, hitting the lowest level since April 2006. As two US states upgraded computer systems during that period, employment agencies reported fewer claims applications. And that’s believed to have played a role in the drop in claims. Nonetheless, the data series did show further sign that the US job market is continuously improving. Continuing claims dropped 75,000 to 2.87 million in the week ending August 11th. Also released, US import price was flat month on month in August and Canadian new housing price index rose 0.2% month on month in July.

Bank of England governor Carney said today that the “economy is picking up and the stimulus is working”. And he’s confident that the outlook is “consistent with the path to returning inflation to 2%”. And, he’s optimistic that the “prospect of sustainable growth has increased”. Economists are predicting that the unemployment rate could drop back to the 7% level sooner than the bank’s forecast of beyond late 2016. Carney acknowledged that “on average, the view of the market is the unemployment threshold will be achieved sooner,” but then, “there is a difference in view, which is natural.” He reiterated that the unemployment rate at 7% is the threshold for the central bank to considering tightening monetary policy. Carney emphasized that it’s “not about time but about conditions”. And, it’s “about jobs and income growing”.

The European Central Bank is set to take on overseeing all 6000 Eurozone banks as early as October 2014 after a vote by lawmakers. ECB president Mario Draghi and European Parliament president Schulz said in a joint statement today that provides for a high degree of accountability of the ECB in the exercise of its tasks under the Single Supervisory Mechanism vis-a-vis the European Parliament as well as adequate safeguards for the protection of confidential information.” Separately, in its monthly bulletin, the ECB reiterated the forward guidance to keep rates “at present or lower levels for an extended period”. Released from the Eurozone, industrial production

The New Zealand dollar soared today after the Reserve Bank of New Zealend left rates unchanged at 2.50% as widely expected. More importantly, the central bank indicated that a rate hike would likely be required in 2014 as inflation picks up. The comment had the effect of sending the New Zealand Dollar higher although the Governor reiterated his warning that the exchange rate has remained elevated and this might be detrimental to exports. The Central Bank also revised the 3-month yield to 3% in the 2nd Quarter or 2014 up from the previous estimate of 2.6%. The revision suggested that the policy rate might rise in the 1st Quarter 2014, instead of the 2nd Quarter as suggested in June.

The Australian dollar, on the other hand, tumbled today after weaker than expected job data. The employment market contracted 10,800 in August, versus consensus of 10,200 growth. Unemployment rate also rose to 5.8% in August. Interest rate swaps are now implying nearly 40% chance of another 25 base point cut from the current historical low of 2.50% by the Reserve Bank of Australia by the end of the year. The situation now makes the next batch of job data very important and further disappointment there would very likely push for another cut in the November meeting.

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