US Dollar:
The Dollar held firm against the other majors this morning as expectations that the Fed may provide a more optimistic outlook for the U.S economy grew after better than expected U.S industrial production data for November. In regards to the Federal Open market Committee (FOMC) statement due today, many expect little change in its sentiment despite encouraging economic news since the last meeting, not least the upside surprise in nonfarm payrolls earlier in the month. A largely unchanged statement will probably not be enough to reverse the upward drift in rates and should have a minimal impact on the Dollar. GBP/USD 1.6321, EUR/USD 1.4560.
Pound:
The pound traded above 1.12 (highest level in a month) against the Euro early this morning and traded up to 1.63 against the USD before UK unemployment data was released at 9.30am. After a little nervousness (and a slight move down) before the actual data release, sterling is now trading stronger again after unemployment numbers unexpectedly showed the number of people within the UK claiming benefits actually fell last month rather than rose as had been forecasted. Unemployment claims fell by 6,300 a sign that the employment market in the UK is stabilizing. This is good short term news for the pound that has generally been starved of good quality UK economic data recently. As the market digests this data, released over half an hour ago there is already speculation “doing the rounds” over how reliable the claimant count reading actually is. The question lies with whether there has been a fall in UK unemployment or if the government is simply shifting claimants around. Incidentally the unemployment rate itself came in at 7.9% (as forecasted) which defines those not in work, want a job, or who have actively sought work in last 4 weeks. The claimant count change defines those currently on the job seekers allowance but does not include those long term unemployed and young members of the population that are moved onto training programs. With the UK election fast approaching, this is naturally allowing this data to be hotly contested. Whatever way you look at it sterling is having a good day especially against the Australian dollar, up over 1%.
Euro:
The Euro was down this morning after the German ZEW index measuring investor sentiment on the performance of the German economy was down to 50.4 from a previous 51.1. Together with liquidity fears of Österreichische Volksbanken, Austria’s fourth largest bank, and the fall out from Greece and Spain, the data was enough to put pressure on the single currency as it lost ground against Sterling and the Dollar. Further weakening may be tested however if Flash Manafacturing PMI, for France, Germany and Europe as a whole rise as expected and core CPI data in Europe released today is positive. GBP/EUR 1.1198, EUR/USD 1.4560.
Quote of the Day
“Enthusiasm is the least expensive and most beneficial cosmetic in the world”- George Zalucki