06 February 2012 at 6:10 GMT
A seeming lack of progress on either of the Greek negotiations (PSI and Troika) over the weekend set the EUR off on a weak tone at the start of trading today. Opening close to New York closing levels from Friday, the EUR slid back to Friday’s lows as no developments were reported on Greek talks and the FT reported that talks with the government had broken down as no agreement could be reached on the deep spending cuts and structural reforms that the Troika were insisting on before the release of the second tranche of €130 bln bailout funds. However, early morning we did see headlines that talks between Greek PM Papademos and the Troika had concluded – but no inference whether this was positive or negative.
In other developments in the Asian session, Australia’s retail sales in December were a bit of a disappointment, falling 0.1 percent on a seasonally-adjusted basis from a month earlier with consensus estimates looking for growth of 0.2 percent. The Australian consumer still remains cautious (retail sales have been below forecast for the past three months and struggling to get above 0.6 percent m/m since April last year) and could give the Reserve Bank of Australia further reason for a rate cut at tomorrow’s meeting. Markets are currently pricing in a 70 percent chance of a 25 basis point rate cut. AUD traded a touch softer at the margin after the data and following EUR’s slide.
UK data continued its mild improvement with the Lloyds employment confidence index edging up to -73 from -75. This comes on the back of the strong services PMI data on Friday (56.0 from 54.0) and the Lloyds business barometer rising to -11 from -23. GBP unmoved however, merely tracking the EUR lower.
The major focus on Friday was the US employment report with currencies ranging and stable ahead of the event. Markets jolted into action after the data with moves in both directions but the EUR ended barely changed on the day. Other risk currencies were better bid however. EUR suffered as Greek negotiations trundled on with no fresh positive headlines to influence.
The US economy added 243k jobs in January, much higher than the 140k expected and slightly-upward revised 203k the previous month, while the unemployment rate ticked lower for the fifth consecutive month to hit 8.3 percent, the lowest in almost three years. This sent US Treasury yields higher to the benefit of USDJPY and pushed any QE3 expectations further down the road allowing the USD index to rise to 79.35. In other Us data, the non-manufacturing ISM reading posted a 3.8 point gain in January to reach 56.8, its highest since March last year, though factory orders for December were a mild disappointment at +1.1 percent from an upwardly-revised 2.2 percent the previous month and consensus 1.5 percent. Nevertheless, Wall St had a field day as data pointed to an on-going recovery with the DJIA rising 1.23 percent, S&P 1.46 percent and the Nasdaq 1.61 percent.
Data Highlights
- US Jan. Change in Non-farm Payrolls out at 243k vs. 140k expected and revised 203k prior
- US Jan. Unemployment Rate out at 8.3% vs. 8.5% expected and 8.5% prior
- US Jan. Avg. Hourly Earnings out at +0.2% m/m, +1.9% y/y, both as expected, vs. 0.1%/2.1% prior resp.
- US Jan. ISM Non-manufacturing out at 56.8 vs. 56.2 expected and revised 53.0 prior
- US Dec. Factory Orders out at 1.1% vs. 1.5% expected and revised 2.2% prior
- AU Jan. TD Securities Inflation out at +0.2% m/m, +2.2% y/y vs. 0.5%/2.4% prior resp.
- UK Jan. Lloyds Employment Confidence out at -73 vs. -75 prior
- AU Jan. ANZ Job Advertisements out at +6.0% m/m vs. revised -0.6% prior
- AU Dec. Retail Sales out at -0.1% m/m vs. 0.2% expected and revised 0.1% prior
- China Dec. Leading Index out at 100.25 vs. revised 100.33 prior
Upcoming Economic Calendar Highlights
(All Times GMT)
- UK Halifax House Prices (0800)
- Swiss Service Production (0830)
- EU Sentix Investor Confidence (0930)
- GE Factory Orders (1100)
- US Fed’s Bullard to speak (1355)
- CA Ivey PMI (1500)
- EU EU’s van Rompuy to speak (1700)
- US Fed’s Fisher to speak (1745)