Gloomy US Employment And Chinese Inflation Figures Send the Pound To US Dollar Exchange Rate Lower

April 11, 2012 - Written by David Woodsmith

STORY LINK Gloomy US Employment And Chinese Inflation Figures Send the Pound To US Dollar Exchange Rate Lower

The Western World was on go-slow mode for four days over the weekend, thanks to Easter celebrations, and this made for some interesting market movements when traders in London, Frankfurt, Paris, Sydney and New York returned to their desks at the start of yesterday’s session.

Several vital data releases had taken place during the four day weekend, making for significant levels of price action in the markets. The general tone of data during the low trading volume period was negative, with Friday’s US Non-Farm Payrolls numbers causing real fears that economic activity is once again slowing in America. The US labour market figures showed that under 200,000 new jobs had been created in the US last month for the first time this year.

Risk aversion was added to by relatively high Chinese inflation figures, released in the early hours of Monday morning. It now seems likely that China’s domestic monetary policy will remain tight for the foreseeable future – the fear now is that this will strangle economic growth in South Asia and that the consequent decrease in demand will derail the global economic recovery.

The shift out of risk hit the usual suspects hard in the currency markets, with the New Zealand Dollar and South African Rand coming under particularly heavy selling pressure, while the safe-haven US Dollar out-performed almost all of the other sixteen most-actively traded currencies on the day, with the exception of the Yen.

Elsewhere, the past week has seen some interesting price action for the Swiss Franc. Last Thursday’s session saw the EUR CHF exchange rate dip below 1.2000 for the first time since the Swiss National Bank announced that it would be enforcing a ‘minimum floor’ at this level for the pair moving forward. The SNB forced the EUR CHF rate back above 1.2000 at the end of last week by aggressively selling off its Franc reserves on the currency markets. This has meant that the Swiss currency, which usually operates as a safe haven itself, has lost ground against the Pound over the past week, seeing the GBP CHF exchange rate briefly break the 1.4600 level during yesterday’s session.

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