GBP EUR Exchange Rate Tumbles on Draghi's Positive Words, Pound to Dollar Investors Await Non-Farm Payrolls Data

Modified: Friday, 5 October 2012 09:02 BST - Written by John Cameron

STORY LINK GBP EUR Exchange Rate Tumbles on Draghi's Positive Words, Pound to Dollar Investors Await Non-Farm Payrolls Data

Today brings another big day in the currency markets, as ‘Non-Farm Friday’ is with us once again. The key US Non-Farm Payrolls labour market figure is due for release at 1330hrs BST and after last month’s extremely disappointing showing of 96,000, expectations are that this month’s edition will reveal a slight uptick in the rate of job creation in the world’s premier economy. A print of 111,000 is the general consensus of analysts’ expectations, and following last month’s below par showing, the potential exists that today’s figure may benefit from a ‘bounce’ effect. With the US Federal Reserve having committed to releasing a monthly $40bn of new money into the financial system last month, the Greenback’s reaction to a much better-than-expected NFP print later today is a difficult one to quantify. Following last night’s Fed minutes, it seems possible that an encouraging US labour market number might serve to strengthen the Buck, as investors would consider it consequently less likely that the Fed would increase QE3. Such a scenario would see the GBP USD exchange rate settle back below the psychologically significant 1.6000 level.

Elsewhere, the euro has continued to pull itself up by its bootstraps during the past 24 hours, partly thanks to comments from ECB President Mario Draghi at yesterday’s post policy-announcement press conference. Draghi was upbeat about the effects of his bank’s bond purchase scheme, details of which were announced at September’s monthly press conference. The ECB President confidently stated that the policy had shored-up market sentiment towards the single currency. The euro has certainly improved in the four weeks which followed the announcement regarding plans for the asset purchase scheme, and improved investor sentiment regarding the region as a whole helped to take the GBP EUR exchange rate as low as 1.2423 at yesterday’s European equities close.

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