GO Markets - FX Market Commentary

US market reversed some of Tuesday’s losses overnight as investors drew strength from President Obama’s US$350 billion dollar to plan to spur on US jobs growth. In a speech President Obama outlined a 3 point plan including tax concessions/credits for businesses and a cash injection over the next decade to improve infrastructure designed to rejuvenate the employment sector which is seen as the bane of the economy’s existence.

A well-attended debt Auction in Portugal also helped investors to regain composure from Tuesday’s sell-off on the back an article in the Wall Street Journal which sparked renewed worries the Europe’s stress tests may have understated bank’s holding of government debt.

As anticipated, the Fed’s beige book showed a slightly more dovish view of the US economy overnight. In a similar theme to recent reports the overall tone suggested economic activity is improving, albeit at a slow pace whilst Labour market conditions remain a primary concern and stated the economy is showing "widespread signs of a deceleration." The Beige book is the views of analyst, market experts and economist in 12 Federal Reserve districts in relation to the near-term economic outlook and current business conditions.

The mildly positive sentiment helps currencies rebound against the greenback, with Sterling, Euro regaining ground. The safe haven Yen however continued to strengthen against the greenback with USD/JPY falling to fresh 15 year lows of 83.3 Yen. At the time of writing the US dollar is buying 83.95 Yen.

The Aussie dollar followed US equities higher rising to session highs just shy of 92 US cents. At the time of writing the local unit is buying 91.8 US cents ahead of the release of the much anticipated employment data this morning. The Australian economy is expected to have created 25,000 new jobs in August from a previous rise of 23,500 with the official unemployment rate expected to edge down from 5.3 to 5.2 percent. The unknown factor for today’s figures is whether or not these figures will include the part time employment of election workers. In the event of the inclusion of election workers, economists are expecting around 50,000 jobs growth in August. In any case, the finer points will be scrutinised, anything in excess of estimates will surely put interest rates in the spot light as investors bet on the chances of a near-term interest rate hike - given pressure on prices will result in a need for the RBA to combat inflation. If there’s a catalyst to push the Aussie convincingly beyond 92 US cent today, this is the event.