Dollar rallied impressively in shortened U.S. session after ECB President Trichet delivered less hawkish assessment on outlook for rates than many had expected. U.S. June payrolls fell 62,000 but was close to expectations of a 55,000 decline, helping maintain dollar's strong rally as traders kept one eye on July 4 Independence Day holiday. "The data shows the ongoing weakness, but nothing out of the ordinary," said Win Thin, currency strategist at Brown Brothers Harriman. Earlier ECB raised key rate by 25 BP to 4.25% as expected but Trichet surprised by saying would not pre-commit to any future rate moves, adding while inflation remains worry, there are downside growth risks.
Markets, which had been buzzing about possible euro rally to its lifetime peak of 1.6020, quickly reversed course as Trichet's comments hit screens. "While there is still the risk that the 1.60 high remains a viable target ahead, we reiterate our belief that it will take a lot to get markets back to expecting an extremely hawkish tightening path for the ECB that would lead to a significant break of 1.60," BBH's Win Thin said. In afternoon trade in New York, EUR/USD was 1.5694 vs 1.5880 late Wednesday, USD/JPY 106.75 vs 105.98, GBP/USD 1.9844 vs 1.9910, CHF/USD 1.0264 vs 1.0141, EUR/JPY 167.55 vs 168.29. Stocks closed mixed, Dow helped by General Motors' marginal recovery from multi-decade lows; GM +1.4% after falling 15% prior session; commodities, industrial sectors led gains in Dow; aluminum giant Alcoa +2.1%. In tech sector Yahoo +2.3 as M&A maneuvers for possible deal with rival Microsoft continued. Dow +0.7%, Nasdaq down 0.3%, Philly semicons off 1%. Short-end Treasurys, led by 2-year note, gained as weak jobs and soft ISM's non-manufacturing data further dampened talk of near term Fed hike; 2-year down 4.2 bp at 2.54%, 10-year +1.8 bp at 3.98%. Nymex August crude rose $1.72 to closing high of $145.29/bbl as momentum trading ahead of long U.S. weekend aided. Comex August gold fell $12.90 to $933.60/oz in reaction to euro losses.
Markets, which had been buzzing about possible euro rally to its lifetime peak of 1.6020, quickly reversed course as Trichet's comments hit screens. "While there is still the risk that the 1.60 high remains a viable target ahead, we reiterate our belief that it will take a lot to get markets back to expecting an extremely hawkish tightening path for the ECB that would lead to a significant break of 1.60," BBH's Win Thin said. In afternoon trade in New York, EUR/USD was 1.5694 vs 1.5880 late Wednesday, USD/JPY 106.75 vs 105.98, GBP/USD 1.9844 vs 1.9910, CHF/USD 1.0264 vs 1.0141, EUR/JPY 167.55 vs 168.29. Stocks closed mixed, Dow helped by General Motors' marginal recovery from multi-decade lows; GM +1.4% after falling 15% prior session; commodities, industrial sectors led gains in Dow; aluminum giant Alcoa +2.1%. In tech sector Yahoo +2.3 as M&A maneuvers for possible deal with rival Microsoft continued. Dow +0.7%, Nasdaq down 0.3%, Philly semicons off 1%. Short-end Treasurys, led by 2-year note, gained as weak jobs and soft ISM's non-manufacturing data further dampened talk of near term Fed hike; 2-year down 4.2 bp at 2.54%, 10-year +1.8 bp at 3.98%. Nymex August crude rose $1.72 to closing high of $145.29/bbl as momentum trading ahead of long U.S. weekend aided. Comex August gold fell $12.90 to $933.60/oz in reaction to euro losses.
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