UK and European rates held as market awaits Non Farm Payroll report

Tom Tong05/Oct/2012Currency Updates

GBP

Thursday was less than successful day of trading for the British currency as it fell to its lowest point in two weeks against the euro as poor UK data kept alive the prospect of further monetary stimulus being opted for in the coming months. Although the interest rates were left unchanged by the Bank of England on Thursday many believe that it may have to implement an easing policy as early as next month as the economy continues to falters.

Data released this week has suggested that not only did the UK’s economy shrink by 0.7 percent in the second quarter of 2012 but that it only saw marginal growth in the third quarter with construction sector activity still contracting and the dominant services sector growing at a much slower pace than anticipated. The Mortgage lender Halifax also added to the worries regarding the economy stating that British house prices in the third quarter of 2012 were 1.2 percent lower than the same period of 2011.

The pound did have some minor success yesterday as it manages to make gains of 0.3% versus the US Dollar.

EUR

The euro manages to make significant gains against a number of currencies on Thursday and global shares gained after the head of the European Central Bank reiterated a commitment to preserve the single currency. The president of the ECB Mario Draghi, speaking after the bank held benchmark lending rates steady at 0.75 percent, said “the euro is irreversible.” He also confirmed what many analysts had already expected that the bank is ready to buy the bonds of troubled euro-zone economies that ask for it.

The euro not only rose to a two week high against Sterling yesterday but also managed to make gains of 0.9 percent verses the Dollar and 0.8 percent against the Japenese Yen.

USD

Yesterday saw the american currency lose ground against both its British and European counterparts, this can be largely attributed to both the ECB and the BOE holding interest rates giving short term support to the pound and Euro.

The main focus in the Unted States on Friday will be surrounding the employment statistics in the country. In the last week of September the US Labor Department data showed applications for jobless benefits increased 4,000 to 367,000. This was a marginally better than a survey released from Bloomberg which had forecast 370,000 claims.

Friday’s non-farm payrolls which is expected to show employers hired 115,000 workers in September, more than the prior month, while the jobless rate rose to 8.2 percent from 8.1 percent.

Speculation that Friday’s U.S. jobs data will show stronger-than-expected growth in September weighed on Treasury prices. The benchmark U.S. 10-year note was down 10/32, its yield rising to just above 1.65 percent.

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Written by Tom Tong

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