FOREX-Euro drops as uncertainty weighs before US jobs data
* ECB's Draghi comments buoy euro; but door open to easing * EUR/USD volatility falls ahead of US jobs data By Julie Haviv NEW YORK, May 3 (Reuters) - The euro slid against the dollar for a fourth day on Thursday as European Central Bank chief Mario Draghi gave a more upbeat assessment of the region's economy but left the door open for policy easing, keeping investors cautious a day before key U.S. labor market data. Trade was choppy, with the euro temporarily bouncing from a two-week low, after Draghi said the euro zone economy was likely to recover this year, although the outlook remained vulnerable to downside risks. He spoke after the ECB kept rates unchanged at 1 percent. While the euro initially rose after Draghi's comments, the "market reaction soon became muted because the ECB really did not change anything, and it was pretty much status quo," said Mark McCormick, G-10 currency strategist at Brown Brothers Harriman in New York. "ECB action is still possible," he said. "If the market thought easing was off the table, the euro would be stronger today, and as we head into a weekend that should have headline risk. With elections in France and Greece, few people want to go long the euro." The euro hit session highs at $1.3180 after earlier falling to two-week lows at $1.3097. It was last trading at $1.3146, down 0.1 percent on the day. "Friday's jobs data is another big reason many people are cautious today," said McCormick. A weaker-than-expected gain in U.S. payrolls could send the dollar lower as it would raise expectations of a third round of Federal Reserve bond buying, or quantitative easing. This program is negative for the dollar as it is tantamount to printing money. The U.S. payrolls report is expected to show a gain of 170,000 in April, according to a Reuters poll of economists. "Following a spate of weak U.S. indicators, many market observers are bracing for lackluster April job growth," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. The euro was also flat against the Japanese yen at 105.42. . "Lower (ECB) rates remain a distinct possibility in our view, but those hoping for an imminent cut have been disappointed," Credit Suisse said. "While the downside risks to growth language leave the door ajar, crossing the threshold remains data dependent." In the options market, one-month at-the-money implied volatility in euro/dollar fell to 8.60 percent from 9.05 percent previously. Volatility rose as high as 9.25 percent on Wednesday. Volatility, however, should remain steady ahead of the French and Greek elections as well as Friday's U.S. non-farm payrolls report. In France, opinion polls showed socialist Francois Hollande will be elected the next French president.. In Greece, surveys showed no clear winner emerging from the elections, with the two main parties garnering barely enough seats for a parliamentary majority. The dollar, meanwhile, rose 0.1 percent against the yen to 80.18 yen, supported by data earlier in the day showing a fall in weekly U.S. jobless benefit claims.
- Tweet this
- Share this
- Digg this