Euro Dwindles As Dollar Steams Ahead

Currency markets this week have been preparing for today’s big event – the US Non-farm payroll report. This is one of the most significant indicators of the jobs situation in the US and following a sky-high ADP payroll report earlier this week, sights have been set high. The earlier ADP report has given the Dollar ongoing upwards momentum all week whilst the Euro has suffered in comparison. Sterling has been performing very well against the Euro but not managed to compete with similar gains on the Dollar. Should today’s farm payroll report come in well above forecasts, the Dollar is expected to strengthen.

Pound Sterling – UK Markets

Sterling has gained on the Euro but lost out to the Dollar as the broad market themes of US jobs figures and swelling European woes influence movements. UK data this week was dominated by PMI releases – first in manufacturing which came in very strong and then construction and services which both came in below target. As manufacturing is the most significant figure Sterling seems to have largely brushed these off the construction and services data showing only brief dips. PricewaterhouseCoopers have released a report outlining that the UK needs to make greater inroads into emerging markets in order to secure its positions as one of the leading economies for years to come.

US Dollar – US Markets

The US Dollar has hit a two week high as expectations rise for today’s monthly farm payrolls report – which is typically treated as the most significant report on US jobs. ADP payroll data earlier this week soared above target setting a high benchmark for today’s report. Nonfarm payrolls for December were originally expected to show an increase of 135,000 with the consensus now being at around 150,000 since the ADP report. Some expectations are now coming in even as high as above 300,000. If the figure is above the original forecasts, the Dollar is very likely to strengthen.

Euro – European Markets

The Euro has fallen to around a five-week low, dropping against fifteen of its sixteen major counterparts, as the expectation for US jobs data today has risen, highlighting the Eurozone’s problems despite strong data from Germany. German factory orders yesterday rocketed up to five times more than expected for the month of November. However with ongoing issues in other nations, this is not having a positive impact on the Euro, highlighting more than ever how Germany is leaving other weaker nations behind. Eurozone retail sales also suffered a surprise drop of 0.8 percent in November. Concerns are also rising that next week’s bond auction could be more expensive due to widening bond yields. Portugal has announced an extra auction for the 12th January in addition to Spain and Italy who have auctions on the 13th. Final revised GDP figures for the third quarter also came in this morning as expected for the year on year at figure at 1.9 percent but moving down from the quarter on quarter on figure to 0.3 percent.

Other Currencies – Highlights

The Australian Dollar has continued to suffer as further focus moves over the cost of the floods to the national economy. This will be the first weekly decline for the currency since December 10th. Coal exports are expected to significantly cut if the floods continue to create havoc with transport systems. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.