March 4, 2011 - Written by John Cameron
STORY LINK Pound Dollar Rate ? GBP/USD Trades Down While EUR Breaks 1.40 Against USD
The release of the most recent weekly Initial Jobless figure in the States caused some positive sentiment regarding the strength of the real economy in the States. The figure came out almost 30,000 below expectations at 368,000 new claims. This provided grounds for optimism that this Afternoon’s key Non-Farm Payrolls figure for February would be positive.
When it was released a short time ago, the Non Farm Payrolls figure for February came out better than many analysts had been anticipating with 192,000 new jobs being created. The figure shows a significant improvement on the paltry 36,000 increase in non-farm payrolls in January.
The immediate market reaction to this key piece of data caused the Euro Dollar exchange rate (EUR/USD) to briefly break though 1.4000 for the first time since last November. Meanwhile, the figure has caused the GBP/USD rate to edge downwards.
As with previous NFP figures, significant volatility is to be expected in the hours following the release. However, there is certain be more optimism about the structural strength of the US figure once the numbers have been analysed. This may have a positive effect on risk sentiment in the markets, which will cause investors to shift out of the safe haven of the US Treasury Bill, causing the USD to broadly weaken on the market.
On the other side of the coin, the Pound has come under further selling pressure on the day today following yesterday’s disappointing services sector PMI number, which showed that growth in the key UK services sector slowed in February.
This figure was followed up with a negative Halifax House Price survey for February, which showed a monthly contraction of almost 1%. GBP and USD appear to be two weak currencies waiting for further fundamental data to provide direction.
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