Disappointment with the currency markets yesterday
Yesterday was a bit of a disappointment with the
currency markets quite flat even though there was some key data released. The
ECB kept interest rates on hold at 1% which meant there was no great fall in
the Euro that may have come with a rumoured interest rate cut. There will be
growing pressure on the ECB to take some action over the coming months with
current austerity measures not enough to stop Spain or Italy from slipping back
into recession. They may be waiting for the results of the elections in France
and Greece before making their move, with voters due to go to the polls over
the weekend. It looks like Nicolas Sarkozy’s time in office is coming to an end
and it will be interesting to see how his likely successor, Francois Hollande,
gets on with Angela Merkel. This new relationship could have a huge bearing on
what Europe does next to deal with their problems.
There has been very mixed data out of the US recently
with recent manufacturing numbers being quite poor but employment numbers
looking more positive on a weekly basis. This mixed data is making predicting
today’s non-farm payroll figure extremely difficult for economists and
commentators with expectations ranging wildly, however the consensus is for an
improvement of 170, 000. Given last month’s figure came in well under
expectation at 120,000 and the economic data has been mixed this last month, I
personally think we could see the same again and I am expecting to see a figure
of around 100,000 to 120,000. This would be bad news for the USD and we could
see it continue to weaken with GBP – USD pushing well into the 1.62’s and EUR –
USD closer to 1.32. Other data which came out this morning were PMI figures out
of Europe and Germany which were both worse than expected. If you are a buyer
of AUD you may see a rise in the rate over the coming month as Australia cut
its interest rate by 0.5% earlier in the week and overnight predicted slower
growth for the coming year.
Today will be quite flat until around 13:00 when the
market will start to position itself for the non-farm payroll figure which is
released at 13:30. The period around the figure will be very volatile so look
to secure your rates early on to avoid any risk.
Have a great bank holiday weekend.
Greece is back in the headlines » « GBP/EUR is starting to get interesting again