US employment data takes centre stage

Today's Highlights

• Sterling whacked by BoE comments and vote

• US employment data takes centre stage

FX Market Overview

Thursday was an interesting day for the Pound. The fact that the Bank of England's Monetary Policy Committee voted 9-0 to keep the base rate on hold was further proof that the global slowdown has slowed down the calls for a rate hike but the BoE also downgraded its forecast for UK inflation and employment growth and even arch-hawk Ian McCafferty voted for no change. That pretty much kills any chance of a 2016 rate hike. Sterling dropped a percent in minutes as traders sought other higher yielding currencies. Some have even dared to suggest the UK base rate might actually fall a little further before we see any rise; the heretics. Sterling had a bad day at the office and that offers GBP buyers great opportunities to gather up some cheap pounds.

The same sort of rhetoric was being heard from the other side of the Channel where ECB President, Mario Draghi hinted at further monetary stimulus in March. Apparently the ECB 'won't surrender to low inflation,' whatever that means. Today's EU news highlight is the German factory orders data but we have already seen that. These fell more than forecast and that is perhaps to be expected when you consider the turmoil in Germany's major export markets, China, the Middle East and the rest of Europe. Nonetheless, a 0.7% decline in German activity doesn't bode well for the rest of the Eurozone but, given Sterling's weakness, it isn't a surprise that the Sterling – Euro exchange rate is once again testing levels below €1.30. Sterling has support at this level so this may be the opportunity for Euro sellers to make some hay.

We heard overnight that there was no growth in Australian retail sales last month and that the Reserve Bank of Australia is about as neutral as a magnolia wall with beige skirting. It is highly unlikely we will see any change in Australian base rates for some time to come and with the Chinese markets on holiday for the next week to celebrate the New Year and Golden Week, that mood is unlikely to change in the short term.

The big news today comes from the West side. American employment reports used to be majorly market moving but with so many other influences, unless the numbers are hugely different to the forecasts, the Non-Farm payroll report tends to have less impact than of old. The markets are expecting around 200,000 to 225,000 new jobs to have been created in January and as long as this is so, the US Dollar, which doesn’t need any more strength really, is likely to stay put. There is a hint that the unemployment rate might dip from 5.0% to 4.9% but anything around here is near full employment and that is good for the US.

We will also get Canadian unemployment data and that too is expected to be relatively similar to last month's data. There is no doubt the Canadian authorities would rather have an unemployment rate below the previous 7.1% but it is unlikely they will get their wish today. The GBPCAD exchange rate flatters the Canadian Dollar because the Pound is generally weak but, as with anything Sterling related, if you need to sell Canadian Dollars and buy Sterling, this is a very attractive medium term rate. Contact your Halo Financial consultant for more information.

And then we have the weekend and I know a lot of us are eagerly awaiting the first games of the 6 Nations Rugby. Can Eddie Jones work his magic on the England Team and get them to fulfil their promise? We will start to see the answers in about 18 hours but the performances of all the home sides in the world cup ought to make this one of the tightest Nations ever. Can't wait. Excuse me, Ahem, Swing low sweeeeeet chaaaaario-ot, Coming for to carry me home.............