USD : The dollar strengthened as political turmoil in Egypt and a dovish ECB post rate press conference made investors run from riskier assets to seek safety instead. A positive economic docket also helped with data showing a decrease in New Jobless Claims to 415K compared to the 420K anticipated and Continuing Claims also improving beyond estimates with the figure dropping to 3925k compared to the 3950k expected. This particularly significant given the importance attached to NFP’s tomorrow. In addition to that 4th Quarter Non-Farm Productivity jumped by 2.6% versus the 2.0% expected, and Unit Labor Cost unexpectedly contracted 0.6% amid forecasts for a 0.2% rise. At midday GMT the dollar traded at $1.3759 to the euro and $1.6212 to the pound.
EUR : After a sideways start the euro started tumbling following dovish comments from ECB President Trichet and falling euro-zone Retail Sales figures. The ECB voted to maintain rates at 1.0% in their monthly meeting whilst at the press conference later Trichet reiterated the main themes of ECB policy rhetoric, that they felt the rate was appropriate given the current economic situation and that they would be monitoring the effects of commodity driven inflation for ‘secondary effects’ on wages and house prices and take the necessary steps if required. Meanwhile on the economic docket Retail Sales showed a -0.9% fall YoY with 0.2% estimated. Fear of bad debt contagion further pushed up the yields of peripheral sovereign debt, with Spanish 10 year bonds rising 5bps to yield 5.10% and Greek rising to 10.63%. The worsening political tensions in Egypt with 5 dead and continued riots also weighed on the euro. A generally problematic outlook for the common currency.At midday GMT the euro traded at $1.3759 to the dollar and £0.8485 to the pound.
GBP : The pound continued to rise on Thursday propelled by positive data although gains were pared later in the American session as uncertainty and risk aversion held sway. UK Services PMI rose to 54.5 in January compared to 49.7 in the month before and expectations of 51.3. This continues the already positive stream of data which has been supporting sterling since the start of 2011. It helps support expectations of a BOE rate hike later in the year because they are more likely to increase interest rates if the rest of the economy is strong. At midday GMT the pound traded at $1.6212 to the dollar and ¥132.40 to the yen.
