Euro slips following poor French data

Tom Tong20/Feb/2014Currency Updates

GBP

London closed with sterling slipping across the board following unemployment unexpectedly coming in to the upside, lifting the total rate of unemployment to 7.2%

Following sterling losses in the London session, Asian trading was fairly tame, with sterling mostly bouncing around resistance levels.

The pincer of rising unemployment and falling inflation makes for a unlikely environment for the BoE to raise interest rates. The figures also end the domino run of UK data consistently beating market calls and coming in on the upside. Yesterdays unemployment figures showed there were 2.34mln jobless people in the three months to December up from 2.34mln. However, the underlying trend still pointed downwards with 161,000 fewer people out of work than this time last year. The figures led to some political mud slinging in the playground of Westminster with Labour eluding to the fact that the recovery is far from over and the Chancellor can not claim to have delivered a full recovery. The city disagrees and the general consensus is that growth this year will be solid, proven by the recent revisions of UK growth forecasts from both the IMF and BoE.

Minor data today with the results of a industrial trends survey and bond auctions.

EUR

The euro rally continues yesterday. However, this morning saw a considerable slip with the euro scuttling downwards hard against the greenback. The euro dipped against the dollar after a index of French PMI came in well below expected. This underlines a outlook that remains fragile for growth in Europe.

Frances service sector shrank the most in 9 months in February, coming in at 46.9 almost three points below market forecasts. The headline composite index of manufacturing and services fell to 47.6 from 48.9 in January.

Most banks at the start of this year having been bearish on the euro, especially against the greenback with widespread claims that it is overextended. However, a slip in the euro has been failing to occur, potentially this morning may have lit the fuse for euro weakness against the eollar.

Data of note out today includes – euro markit PMI.

USD

A mixed day for the dollar yesterday, jumping half a cent on the pound in early morning, before losing the same amount after lunch. It dropped off gradually against the euro, although it has seen major gains already this morning on the back of the poor EU data.

The volatility was down to the plethora of data from across the globe, with UK unemployment supporting the dollar at the beginning before a range of dodgy US data pushed it to the downside.

Other data our yesterday showed a huge reduction in US money markets’ activity in the eurozone for the last quarter 2013, another factor which has likely influenced the decline of the euro.

Today sees inflation data from the US, as well as jobless claims and manufacturing PMI.

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Written by Tom Tong

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