GFX Afternoon Update May 2 2013

Good Afternoon 

The EUR.USD rate was much higher this morning after the announcement by the ECB to cut interest rates. Cutting the interest rates usually makes the value of the currency go down while initially the EUR.USD had done the opposite. The higher value of the Euro can be explained by traders buying up the Euro before this announcement in anticipation of stimulating the EU economy and then selling it once the results of the announcement are known. The Euro weakened after Draghi announced that the ECB is technically ready for a negative deposit rate which has been attempted by very few countries. The current rate cut was made to support the economy while labour conditions were very weak and there was continued uncertainty about the recovery. This has pushed the Euro weaker and decreased its value against the US Dollar as the day goes on. The EUR.CAD has followed the same pattern, moving up during the announcement by the ECB, and down following the remarks. After making a large move earlier in the morning the EUR.USD change has slowed while still continuing to strengthen. 

Trade Data has come out today for Canada and the United States and both are better than expected. Canada has created a trade surplus of .02 billion which is better than the projected value which was a deficit of .87 billion. The United States has shrunk their trade deficit to 38.8 billion which is better than a projected deficit of 42 billion. The Initial Jobless Claim was released today and the number fell to 324k exceeding expectations of 345k. This is the first good job data out of the US in a long time and helps them move out of a recession. This has bumped the USD/JPY up above the 98 level as the USD has been helped by the decrease in unemployment.  This has also strengthened the USD against the Canadian reversing the direction that the Canadian Dollar was moving, towards parity and increasing the value of the USD/CAD. 

Yonah