US Dollar:
The disappointing signals from the ECB helped the dollar to claw back losses on the Euro this morning, while Sterling was able to extend its gains after a day of little U.K data. The big news today is U.S Non Farm payroll data – it’s expected to drop by 111K, while U.S Average Hourly Earnings should rise by around 0.2%. President Obama is expected to remain focused on the economy, although he suggested that a government bail out plan to create new jobs would be unfeasible at this stage. USD movement has been limited this week as has been other currency majors and there is no reason to see major movements today, expect the Dollar to hold steady against Sterling and Euro, with the jobs data probably confirming expectations.
EUR/USD 1.5064 currently, GBP/USD 1.6617.
Pound:
Sterling has regained a small amount of losses (seen yesterday) this morning against the euro and USD in comparison to yesterday’s close. Sterling initially fell yesterday particularly against the USD after a weaker than expected release on the UK services sector. “The UK services PMI was weaker-than-expected which highlights the likelihood of an under performing UK economy. This sets sterling up for potential disappointment given that so much optimism about the UK economy had been priced in,” said BNP Paribas currency strategist Ian Stannard. In more general economic news the Telegraph has reported that British households should be prepared for extended financial pain in 2011 rather than next year on the back of rising taxes and spending cuts that will filter through from government action. Capital Economics (headed up by Richard Bootle) who reported the news went on to predict that 2011 will be the year consumers will feel most financially worse off. I’m sure many will be thinking can it get any worse? This highlights once again the severity of UK public finances and what measures particularly after next year’s elections the government will take to “grab a bigger handful” of money out of our pockets. So where does all this negative news I keep delivering leave sterling? Quite simply under continuous pressure with little chance of a decent recovery until our economy provides some concrete evidence of a move upwards. There is no UK data due out today with the next focus on Halifax house price data and manufacturing production data due early next week. Have a great
weekend Christmas shopping!!!
Euro:
The Euro lost the gains it had made on Sterling and the Dollar today as the ECB President Jean-Claude Trichet made comments failing to give a more forceful indication of an exit strategy from the ECB’s unconventional policy measures to combat the credit crisis. He suggested the withdrawing of stimulus measures would occur sooner rather than later- faster than economists expected, clearing the path for higher interest rates next year. While he stopped short of actually confirming a possible rate increase, the rhetoric strongly suggested that would be the case, a move that could fuel further gains in the Euro and undermine economic recovery in the region. There is no real data from the Euro- zone today, but eyes will be on U.S jobs data to see if it confirms high unemployment, and President Obama’s reaction to it. GBP/EUR up at 1.1035, EUR/USD shows USD strength at 1.5064.
Quote of the Day
“There are a million ways to lose a work day, but not even a single way to get one back.” – Tom DeMarco & Timothy Lister
