Friday’s non-farm payrolls in the US revealed that 203,000 jobs were created, well ahead of estimates. This is likely to have far-reaching implications for several of the world’s leading currencies.
Despite a day of indecision on Friday, the jobs number is likely to increase the risk of Federal Reserve tapering in the very short term. The greenback market will likely outperform if a reduction occurs.
Meanwhile, the euro has appreciated 7.4% in the last year, and futures speculators moved to a net long position. 53% of open interest is expecting the currency to appreciate.
This could prove problematic for the ECB, which may need to weaken the currency to boost exports in order for a recovery to gain traction. This would involve further monetary stimulus.
EUR/USD appreciated throughout Friday despite a short drop on non-farm payroll data. These gains have been pared slightly this morning to hit 1.3709 at 8:36 GMT this morning.
The Australian dollar halted gains on prospects that the nation’s economy will lag US progress. GBP/AUD was trading at 1.8145 at 8.38 London time. Futures speculators see the bearish view continuing, as 76.16% of open interest has gone short – a bet the currency will fall.
Sterling is little changed versus the dollar and euro before Mark Carney speaks at the economic club of New York. UK industrial production is expected to have slowed in October by rising 0.4%, a report is expected to say tomorrow according to a Bloomberg survey.
Against the dollar, after dropping sharply on good employment data released in the US, sterling pared losses late in Friday trading and early today. The pound was trading at $1.6357 at 8:09 London time.
After a sustained drop against the euro last Friday, the UK currency climbed back upwards during Monday’s Asian trading as it hit 1.1933 at 8:11 GMT.
Data from the Commodity Futures Trading Commission states that investors are net long on the UK currency – 57.09% of open interest is speculating that the currency will rise.