Payrolls bring the euro to multi-year lows

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Friday’s jobs report failed to spark anything more than a continued grind lower in risk with the euro hitting 2 year lows against the dollar and near 4 year lows against sterling. 80,000 jobs were added in the month of June, below the 100-120k that the market had been expecting, and while this is not a disastrous figure it continues the uncertainty around the actions of the Federal Reserve.

A lower figure would have really put the cat amongst the pigeons and would have increased the chances dramatically that we see some form of QE from the Fed in the near term. Likewise, a good figure would have seen these expectations rowed back for a couple of months. This slow ebbing away is what is hurting us.

A lower than expected current account surplus and machinery orders set of released from Japan over the weekend has also hurt sentiment into the beginning of the week.

Given the negative start to the week it seems almost right that it should be backed up by a meeting of European Finance Ministers today. The general plan is to follow on from the positivity of the last EU summit at the end of June and chatter will be about terms of a Spanish bank bailout and what part the continent’s EFSF and ESM rescue mechanisms would play in such a plan.

You can expect that it will be the Northern core countries that have the most to say about this. This follows Finland and the Netherlands kicking up a stink last week over collateral against payments to Spain. The Finnish also seemed to threaten to leave the euro last week although that was quickly refuted.

Once again it is the bond markets that are showing us where the pain is centred. Spain’s 10yr yield is back above 7% following its falls after the most recent summit while Italy is still firmly above the 6.0% mark with the spread of their yields over that of Germany’s rising each day. There are not too many auctions this week although Italy have a bill sale on Thursday afternoon.

Apart from the EU summit, there is little else worthy of comment today and, with nothing to turn us around, the gradual decay of the euro should continue through the rest of the session

Good luck.

Indicative Rates Sell Buy
GBPEUR 1.2590 1.2618
GBPUSD 1.5495 1.5517
EURUSD 1.2288 1.2312
GBPJPY 123.29 123.56
GBPAUD 1.5195 1.5211
GBPNZD 1.9449 1.9478
GBPCAD 1.5784 1.5813
NZDUSD 0.7954 0.7973
GBPZAR 12.76 12.81
USDZAR 8.2264 8.2675
GBPPLN 5.3305 5.3573
EURJPY 97.75 98.00

Please note these rates are “interbank” rates ie they indicate where the market is currently trading and are not indicative of the rates offered. Rates are dependent on amount transacted. It is important to remember that foreign exchange rates fluctuate all the time. The rate you will receive will depend on the amount and currency you require..

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