The American Dollar has bounced back during Asian trade after better than expected jobs data last Friday coupled with mounting concerns over European debt.
Non-farm pay rolls increased 151,000 in October, the first increase since May, as a 159,000 jump in private employment more than offset a 8,000 drop in government payrolls, the Labor Department said on Friday. October’s strong jobs growth however failed to make a dent in the lofty unemployment rate, which remained at 9.6% for a third straight month, in line with market expectations.
The Dollar reacted positively as traders consolidated their positions and re-evaluated new short trades. Now that Quantitative easing has become a reality it seems currency traders are now turning to other economies and looking closer at their books.
The European economy is coming under closer scrutiny again as euro zone debt problems seem untenable in the longer term.
Last Friday the 10-year Irish bond yield spread over benchmark German debt hit record highs, while the 10-year Spanish/German spread rose to its highest level since mid-July. This again acts as a signal to the markets that traders are losing confidence in the European economies ability to service their debts.
“Now that QE by the Fed has become a fact, the market is paying attention to other factors that were overshadowed ahead of the Fed meeting,” said Roberto Mialich, currency strategist at Unicredit in Milan.
The European economy has cracks appearing and without the German growth they would be bankrupt. We are looking closely for any chinks in the German armour over the next few months. The pound certainly looks like it has turned the corner against the Euro and many other currency pairs. Clients with long term delivered currency needs should certainly get in touch to discuss how we can help.