Draghi gloomy over Europe as market awaits Non Farm Payroll figures

Tom Tong07/Dec/2012Currency Updates

USD

The dollar broke it’s negative trend against the common currency yesterday, the move was initiated on Wednesday but properly took force when the ECB’s Mario Draghi yesterday downgraded the Euro-zones growth forecast.

The US was also supported by the US initial jobless claims, which came in at 370,000, that is satisfactorily just bellow the estimated 378,000.

Today there is the monthly anticipated Non Farm Payrolls data to be released. It’s foretasted to come in bellow 100,000 at around 93K. Any positive surprise in the non farm data is likely to further strengthening the dollar.

In addition there is a number of medium tier data sets released from the US including Average hourly earnings and different payroll data.

GBP

The Monetary Policy Committee held firm yesterday, with interest rates and the quantitative easing programme remaining unchanged. A strong indicator that the Bank of England has lost its faith in QE.

Chancellor George Osborne was forced to admit that the period of austerity will last now for a further year, to include 2018. Public spending on the unprotected areas of defence, the home office and local government may be cut by up to 30%.

More negative news for the pound yesterday, the trade balance dropped further into the red. The total deficit was £3.6 billion. The three month deficit for goods reached a record high of £28 billion. This makes pretty gloomy reading for the forth quarter GDP figures. With the thoughts of an export led recovery for sterling looking less and less likely.

Important data coming out today with the Bank of England releasing the consumer inflation expectations figure.

EUR

The ECB has slashed the eurozone’s growth forecasts. Draghi now expects the GDP figures to decrease by 0.5%, as opposed to the previous forecast of growth of 0.4%. Output figures dropped 0.1%, a second consecutive decline, and the unemployment figures around the Eurozone increasing. Greek unemployment hit a record 26% whilst French unemployment hit a 13 year high of 10.3%.

All of this lead to the single currency declining against almost all of the major 16 major peers. Overnight the euro dropped 0.1% against the dollar over night, in addition to a 0.8% drop over the course of yesterday.

The Euro dropped from a seven month high against the yen.

The rand reached its strongest level of the last 3 weeks, after a period of continuing decline. This is due to South Africa’s account deficit remaining unchanged in the 3rd quarter.

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Written by Tom Tong

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