Daily Treasury Insight

Markets Hold Breath Ahead of Payrolls

Currencies have traded in tight ranges over the past 24 hours or so as market participants take to the sidelines ahead of this afternoon’s release of the key US non-farm payrolls report for August. With risk appetite supported by some encouraging data over recent days (including yesterday’s better than expected US pending home sales and weekly jobless claims) the euro and high yielding currencies are holding onto gains versus the dollar and yen seen earlier in the week ahead of the release, though sentiment remains fragile.
Starting the day within striking distance of this week’s high of $1.2855, $1.287 is seen as the next target for the euro versus the USD, though much will depend on the tone of this afternoon's labour market data. Consensus forecasts are showing a drop of 100,000 in the payroll, as the layoff of temporary census workers continues, with the unemployment rate projected to tick up marginally to 9.6% from 9.5%. Anything worse than this could weigh heavily on sentiment, which would not favour the euro.
Also of interest today will be the services PMI and ISM surveys from Europe and the US as investors continue to look for signs of a slowing in the global economy. There was little reaction from forex markets to yesterday's ECB policy announcement and press conference. The central bank was a little more upbeat in terms of its economic assessment, revising upwards its GDP growth projections for this year and next, though it must be noted that this was done from a very low starting point. However, Mr Trichet indicated once again that the ECB is not considering raising rates any time soon. Sterling, along with other currencies, is expected to consolidate in narrow ranges ahead of today's key data.

 

OPEN MARKET RATES
GBP/USD	1.5422	HKD	11.9895	SEK	11.1754
GBP/CAD	1.6241	CHF	1.5625	DKK	8.9553
EUR/GBP	0.8312	JPY	129.95	NZD	2.1583
GBP/EUR	1.2028	AUD	1.6995

Click here to subscribe to have the Daily Comment emailed to you every morning. Click here to unsubscribe.

This commentary is for information only and is not an invitation to deal. Please note telephone conversations may be recorded. First Trust Bank is a trade mark of AIB Group (UK) p.l.c., incorporated in Northern Ireland. Registered Office 4 Queen's Square, Belfast BT1 3DJ,
Registered Number NI 18800.