Eurozone news:
After the comments of Jean-Claude Trichet the euro recovered any lost ground yesterday to re-test highs of the week. Greece is still the yard stick for euro zone problems and Trichet’s comment “we do not see another recession for Greece” would have done the single currency a world of good. Next on the market hit list was Spain and the fact that their most recent bond auction was well received added yet more reason to think twice about selling the euro. The battle now comes between this improved euro zone data and the forthcoming U.S non-farm payroll. Strong U.S data could see downward pressure on the Euro to $1.31 whereas weak U.S data would compound speculation that the U.S is facing a double dip, thus giving the Euro further support. If the latter occurs we could see EUR/USD hit $1.3250 or higher. “Economies in Europe are doing really well,” said Yoh Nihei, a Tokyo-based trading group manager at Tokai Tokyo Securities Co. “Risk appetite may improve and the bias for the yen would be to weaken”. The significance of this being that the Yen is at the forefront of safety in times of turmoil.
US Dollar news:
Ahead of U.S non-farm payrolls the currency markets are a little subdued as the major players wait for what is a very crucial bit of economic data. The monthly payrolls data are “critical” this time around, said Vassili Serebriakov, foreign-exchange strategist at Wells Fargo in New York. Investors will look to the jobs data to determine whether the Fed further delays a normalization of monetary policy. For the time being both the Pound and Euro are creeping higher.
Sterling is back into $1.5904 having slipped to $1.5836 at 16:30 yesterday. The euro has also moved higher taking it to $1.32 and currently bouncing either side of this level. Both gains are limited to 0.7% thus far for Sterling and Euro against USD. Against the commodity currencies the results are mixed, AUD is up 0.23% but NZD is lower by -0.20%.
The Canadian dollar has marched on ahead, somewhat unnoticed. The current price on the market is $0.9850 and at the highs of the day. No doubt the Loonie will gather some attention once past $0.99 when suggests of parity re-emerge. As previously mentioned the non-farm payroll is the economic event to watch out for, we may see some movement prior to its release at 13:30 London time if a whisper number starts doing the rounds.
Pound news:
The big event yesterday was the MPC rate decision, whilst major chaos would have ensued if the rates changed; the rates remained the same. The official bank rate is 0.50% and the asset purchasing facility remains at £200B. A look back at the week for Sterling shows little movement overall, against the Euro the Pound has resolutely remained at the mid €1.2050 levels and this morning is no different as the price on the market is €1.2054. A 0.04% is hardly indicating a direction for GBP/EUR but the release of manufacturing production m/m and PPI m/m could give Sterling a boost if the numbers are to the positive.
The Pound is struggling to gain against the Euro and a successful Spanish bond auction coupled with vastly improved euro zone sentiment has kept GBP/EUR in tight ranges. Against the U.S dollar trading has been either side of $1.59, yesterday Sterling slipped lower but has pared losses to move back to $1.5904 as morning trading suggests Sterling has a slight tail wind in momentum. Already the markets have turned their attention to the BoE’s quarterly projections on inflation and the economy, due next Wednesday. Elsewhere in the currency markets Sterling is little changed, currently -0.11% down on AUD at $1.7336 and no change at CAD $1.6157.
Quote of the Day
“Courage is the power to let go of the familiar.” – Raymond Linquist
