Currency Markets Disappointment

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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.

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