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Asian Session: US dollar corrects after soft data; aussie falls on low commodity prices

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Forex chartThe US dollar was weak after some worse-than-expected data the previous day, which showed that the world’s largest economy may be undergoing a soft patch.  The Australian dollar was also weak.

Weaker-than-expected ADP payrolls for March, which posted their smallest gain in more than a year, caused some concern that Friday’s nonfarm payrolls report could also disappoint.  This in turn – if backed by other data – could lead the Federal Reserve to hold off from raising rates for some additional months.  The ADP payrolls came in at 189,000 versus an expectation of a 225,000 gain.  Similarly, the ISM manufacturing survey also came in at its weakest in 14 months, still in expansion territory at 51.5 but missing expectations of a 52.5 print.  The survey’s employment component was particularly weak; dropping to 50 from 51.4, which could mean that manufacturing employment could also disappoint in Friday’s employment report.

The euro took advantage of the weak dollar to eventually make its way above 1.08, while the yen managed to push dollar / yen below 119.50 at a low of 119.41.

The Australian dollar failed to post gains against the weak US dollar, as expectations of a rate cut by the Reserve Bank of Australia next week and a further drop in iron ore prices, weighed on the aussie.  The Australian currency dropped to as low as 0.7567 US dollars, not far from the 5 ½ year low registered around three weeks ago at 0.7559.  A bout of US dollar weakness near the close of the Asian session helped the aussie to recover to 76 cents.

Liquidity was expected to be thin as many investors started their holidays because of the Easter break.  For a number of markets such as Australia, New Zealand, UK, Germany, France, Italy and Switzerland, today is the last day of trading before they reopen on Tuesday because of Good Friday and Easter Monday.  The US will also be closed on Friday except for foreign exchange and money markets.

It will be a relatively busy day ahead, particularly during the US session as only UK construction PMI will come out in the first half of the European trading session.  Later, weekly jobless claims, trade balance and factory orders will be released during the US session.  Fed Chair Janet Yellen will also make a speech on economic mobility in a Federal Reserve-organized event in Washington, although she may not address monetary policy or the state of the US economy.

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