The euro manages to close higher despite that ECB lowers interest rate

EUR:

It turned out to be quite a volatile week for the single currency with the interest rate cut of the European Central Bank on Thursday, and the US Job report on Friday. As expected by most market participants, the European Central Bank lowered its main refinancing rates from 0.75% to 0.5% at its monthly meeting on Thursday.

This sent the euro down; especially after Mario Draghi's comments in the official press conference that takes place after the rate decision announcement. Draghi mentioned the option of having potential negative deposit rates. The euro dropped significantly after these words hit the wires; but the single currency recovered all of these losses Friday morning when ECB Governing Council Member Ewald Nowotny stated on television that the markets clearly over-interpreted Draghi's comments.

We than saw a similar roller-coaster ride on Friday afternoon when the US non-farm payroll numbers were published. EUR/USD fell 100 pips after the data was published, in a rush to buy the US Dollar that was visible across the board, to eventually recover more than 120 pips afterwards. Although there were a number of reasons for the euro to drop the single currency actually managed to close higher for the week. With an almost empty economic calendar this week it is likely that the euro stays range-bound in the short-term. Only an end-of-week meeting of G8 Finance Ministers could potentially trigger a larger move, especially if there are any comments regarding the latest stimuli measures out of Japan.

USD:

After a weak start to last week's trading, the greenback finished on a bullish note on Friday after the widely watched non-farm payrolls were published. The world's largest economy added 165,000 new jobs in April. This was higher than the consensus estimate and was also better than March's 138,000 new jobs. The March number was revised upward from 95,000 new jobs. Change in private payrolls came in stronger as well, only the manufacturing sector was lagging behind as most of the new positions were created in private businesses and the service sector.

 CAD:

The Canadian dollar was one of the main gainers last week. The loonie (as the Canadian dollar in known due to an image of an aquatic bird on the one dollar coin) gained more than 100 pips against the US dollar last week after stronger economic data. The Canadian trade balance for the month of march showed a surplus of 24 million CAD when the market actually expected a negative balance of 700 million CAD, February's figure was revised higher. Canadian exports rose 5.1% to 40.5 bln CAD and imports rose 1.7% to 40.4 bln CAD - the second-highest figure on record. March building permits increased more than forecast and this continued to fuel the positive sentiment for the loonie. Canada's government furthermore announced that Stephen Polosz will be the new Bank of Canada governor.

 AUD:

The Aussie dollar was under selling pressure again last week as the pair continues its downtrend on weaker than expected economic data, data that pointed to the increasing likelihood of a rate cut by the Reserve Bank of Australia - a cut that materialised earlier this week on Tuesday morning.

 YEN:

Last Friday, after several days of consolidation the Japanese yen lost support across the board. Forex investors took on more risk after the positive surprise of the US non-farm payroll data which sent equity indices worldwide higher. USD/JPY shot up 100 pips after the better than expected employment report last Friday, trading just underneath the widely watched 100 yen level which acts as short term resistance but should be surpassed rather sooner than later.

 GBP:

The British pound continued its recovery against the greenback after the 10% drop we have seen in the first three months of the year and now trades solidly back above the 1.55 level. From a technical perspective the recovery of the world's oldest currency is to be considered as a technical correction within the short term downtrend. We expect the upside to be limited. EUR/GBP trades near the lows of its two month range near key technical support at 0.84.

 Gold:

Last week the yellow metal continued its recovery after the sell-off seen three weeks ago. Apparently there is strong physical demand from private buyers in China. Gold trades 150 $ above the 15 April low at $1,321/ounce but failed so far to take out the 1500 $ level on the upside again. As long as this resistance is not taken out we expect a drift lower again and maybe even get a re-test of the $1,320 - $1,350 area.