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    European Session – Euro bounces back to 1.07, sterling extends higher after mixed UK jobs data

    Most currency pairs haven’t moved much from Friday’s post-nonfarm payrolls levels. The exception was the pound which moved higher and further away from Friday’s low that came close to the key psychological level of 1.50.

    Despite falling ahead of the key UK employment report today, sterling rebounded quickly from a knee-jerk reaction that took it down to 1.5132 versus the dollar after the mixed data. It rose to 1.5191 later.

    The UK jobs report showed that the ILO unemployment rate unexpectedly fell to 5.3% in the three months to September from 5.4% in the previous three months, the lowest since 2008. However, weekly earnings growth declined. Excluding bonuses, the rate fell to 2.5% in September from 2.8% in the prior three months and was below forecasts of 2.7%. Including bonuses, weekly earnings rose by 3.0% year-on-year, which was unchanged from August and below consensus estimates of 3.2%.

    Meanwhile, the Chief Economist of the Bank of England, Andy Haldane, speaking today at a financial conference hosted by the BoE, showed a shift from his recent stance for a rate cut in the UK. He now says that he doesn’t want to be “pinned down” on when rates might move, or even in which direction.

    The euro traded back above the key 1.07 level as the dollar lost some steam from the post-NFP rally on Friday. A high of 1.0772 was reached in Asia, with a pull-back in the European session to 1.0705 before bouncing back up again slightly. Political issues in Portugal kept sentiment on the euro negative and Portuguese bond yields rose back towards four-month highs after left-wing parties ousted the austerity-minded centre-right government in Lisbon. Meanwhile, going forward, the euro will likely remain vulnerable due to the prospects that the ECB will further loosen monetary policy with the possibility of more QE and even deeper negative rates, while the Fed is moving in the opposite direction of a rate hike increase.

    The dollar remained capped below 123.19 yen today as the post-NFP rally continues to be retraced. Risk sentiment was slightly dampened today after Chinese data showed growth in the world’s second largest economy appears to be slowing. October industrial production growth slowed to 5.6%. However, retail sales helped offset the weakness, rising by 11% from a year earlier.

    The dollar’s recent strength and the mixed data out of China continued to weigh on commodities prices. Gold prices remained near three-month lows of $1085 as the possibility of higher interest rates in the US make the non-interest bearing precious metal less favourable to hold. Oil prices resumed their decline on news that US crude stocks rose last week. Crude oil fell to $43.35, the lowest so far this month.

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