The Euro looks toward the reopening of banks in Cyprus for direction cues while the Swedish Krona may rise if German jobs data tops expectations.

Talking Points

Swedish Krona May Rise if German Jobs Report Tops Expectations
Euro Looks to Reopening of Cyprus Banks for Directional Guidance
Yen Rose as Aussie Dollar Underperformed on Risk Aversion in Asia

German Unemployment figures headline the economic calendar in European hours. Expectations call for the economy to add 2,000 jobs in March, keeping the unemployment rate unchanged at 6.9 percent for a sixth consecutive month. The March set of German PMI figures showed resilience in hiring despite weakness in overall private-sector activity. Indeed, Markit reported the strongest improvement in employment since January 2012, saying companies it polled cited “efforts to increase capacity and long-turn expansion plans.” Currencies geared to German growth – notably the Swedish Krona – may find support if that proves to foreshadow a better-than-expected outcome on today’s report.

As for the Euro itself, the focus remains on lingering uncertainty in Cyprus and political instability in Italy. Greek newspaper Kathimerini reported that Cypriot banks will finally reopen today and traders will be closely watching to gauge the effectiveness of capital controls installed to prevent a mass exodus of capital. Restrictions include a €300/day withdrawal limit and a ban on cashing checks. Taking more than €1000 in cash across the border is likewise now prohibited. A relatively orderly reopening may boost the single currency, social unrest or reports of banks flouting the new rules stand to yield the opposite result. Meanwhile in Italy, Democratic Party Leader Pier Luigi Bersani is expected to report that he was not able to forge a coalition today, clearing the way for President Napolitano to tap another politician to attempt to form a government.

Risk aversion gripped currency markets in overnight trade. The Japanese Yen outperformed, adding as much as 0.5 percent on average against its top counterparts as Asian stocks declined, boosting safe-haven demand and encouraging an unwinding of carry trades funded cheaply in the low-yielding currency. The Australian Dollar bore the brunt of risk-off flows in the FX space, sliding as much as 0.5 percent on average against the majors.

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