Mario Draghi suggests that there will be greater Eurozone fiscal Union, and ECB bond purchasing after D-day on the 9th

Tom Tong02/Dec/2011Currency Updates

GBP

Sterling reversed losses against the dollar on Thursday, tracking gains in the euro, as risk appetite picked up following decent demand at a Spanish bond auction. However, sterling remained vulnerable to concerns about the state of the UK economy which were reinforced by data showing the manufacturing sector contracted for a second successive month fuelling fears the country is teetering on the brink of a recession. The contraction was not quite as severe as had been forecast and some market players said this helped limit the reaction in sterling. Overall, the UK economic outlook remained bleak and analysts warned sterling was unlikely to outperform the dollar while concerns about global growth and the Eurozone crisis persisted.

USD

The dollar inched higher during Asian trading hours on Friday – supported by encouraging Economic Data – as investors positioned themselves ahead of the closely watched U.S. Non Farm payrolls report due later in the day. Focus turns to today’s Non-Farm Payrolls report, which is expected to show the creation of 122,000 new jobs in November after October’s 80,000 gain. The Unemployment Rate is expected to remain unchanged at 9%.

EUR

Successful French and Spanish bond auctions helped support the euro, as increased appetite for European sovereign debt provided a temporary respite from concerns that the euro zone’s debt crisis is worsening.

A day after six major global central banks supercharged a rally by providing a liquidity boost to cash-strapped European banks, the common currency traded with tenuous optimism. Many analysts are awaiting the outcome of a European Union Summit on Dec. 9, where the leaders of Germany and France will advance treaty changes designed to better integrate the 17 economies that use the euro currency.

However confidence in the Netherlands was low. In a letter to Dutch daily Het Financieele Dagblad, the chief executives of Shell, Philips, Unilever, DSM and AkzoNobel argued against protectionism. “It is one minute to twelve and is therefore of the utmost importance that there will come a strong handling of the euro crisis in the short term,” the CEOs including Peter Voser from Shell and Paul Polman from Unilever said.

Eurozone PPI will be released later today.

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Written by Tom Tong

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