Today's Highlights

  • UK unemployment up but there are some bright spots

  • Eurozone industrial production better than forecast

  • US data very mixed but USD stronger


FX Market Overview

UK unemployment rose again last month and average earnings rose far slower than expected. All bad news then I guess. However, the pace of the rise in unemployment slowed and there are signs that the private sector is starting to create enough jobs to balance the losses in the public sector. That boosted optimism that the British economy may just be turning the corner. Sterling traders clearly liked the news and the Pound had a pretty good day in most quarters.

That was not the only bright spot on the data front; Eurozone industrial production was not as poor as many had envisaged and EZ inflation was in line with the 1st estimates so no nasty surprises there then. We get the European Central Bank’s monthly bulletin today and Eurozone unemployment figures as well so it will be a busy one for the euro. The shared currency had a poor day yesterday and is sitting on its heels compared to the US Dollar and Sterling. We may be on the verge of a significant break above €1.2050 against the Pound and a proper drop below $1.30 against the US Dollar. However, the caveat to that suggestion is that we have been at both technical levels a number of times and each time the momentum has petered out before the big break so let’s not get too excited just in case. And just to confirm that Europe’s problems are not all about Greece, Hungary is being penalised for not meeting its austerity commitments and in classic Spanish style, Spain has ignored the EU’s imposition of a 4.4% debt to GDP requirement for this year; choosing instead to work to its own objective of 5.8%. The EU came back with a 5.3% suggestion. Make your minds us guys; is the limit a valid one or not and if Spain can ignore it so brazenly, what hope does the euro have?

In the US, apart from the bromance between Obama and Cameron, there was a little data yesterday. US Mortgage Applications were weaker than forecast. A reading of minus 2.4% was significantly poorer than the previous figure of -1.2%; a stat that will disappoint the US authorities who had hoped things were improving in the house buying market. The bright spot was that the cost of importing goods into the US rose by just 0.4% against an expected 0.6%. With US interest rates being at an all time low, anything that helps to keep inflation low will be welcomed. The head of the US Federal Reserve, Ben Bernanke was in the news decrying the frustratingly slow pace of growth in the US economy and expressing his fears that this was impeding lending and putting pressure on the banking system. That didn’t hinder the US Dollar which had a strong day.

Elsewhere, the (deep breath in) Organisation for Economic Cooperation and Development (OECD to its friends) says that G20 economies grew by just 0.7% in the last quarter of 2011 after growing 0.9% in Quarter 3. I guess no one was surprised but it does serve as a note of caution to those who think the US recovery is all we need.

In the Far East, China’s announcement that it is maintaining its property market restrictions put a dampener on prospects for exports from commodity producers. The Australian, New Zealand and Canadian Dollars all dipped on the news and the US Dollar made significant gains against the Japanese Yen.

And from the ‘you really don’t need that’ category of the news comes a story of an American Airlines stewardess who suffered a panic attack screaming about the plan crashing and about the 911 attacks. The poor woman had apparently forgotten to take her medication for a bi-polar disorder. The poor passengers then had to take off after she was subdued and removed from the plane. The funniest part is that when she began ranting down the PA system, virtually everybody got their phones out to film the scene. Now that’s an example of 21st century living. I just hope they were in flight safe mode.