Economic data out of Germany has beat market forecast, with the news providing support for the euro. The euro is at near one-month lows against the dollar on reports that the European Central Bank is close to agreeing on a Quantitative Easing programme. That stands in contrast to the US economic data seen on Friday that showed nearly 200,000 jobs added to the economy. Investors will be keen to watch for the FOMC minutes this week as they could shed light on where the central bank plans on taking its policy. After the March meeting investors brought their expectations for a rate increase forward by a quarter, which triggered the dollar’s initial rise. With the Chinese markets closed for a public holiday, the Asian session traded thinly. The Japanese yen made considerable gains, as investors looked for safety. There is a lack of economic data in the UK as attention swings towards this week’s Bank of England policy meeting. No change is forecast, but sterling gains could be limited going into the policy announcement.
Sterling
Sterling’s gains continued to weaken at the end of last week as the currency became less able to fend off a strengthening US dollar. Sterling weakness could be limited given an expected IMF report, which could revise higher its growth outlook for the UK, hence helping the currency. At the same time investors will be watching for this week’s BoE policy meeting. The central bank is not expected to alter its policy this week, but commands a bit of attention nevertheless.
US dollar
The non-farm payrolls increased by 192,000 and was only slightly lower than forecast. The breakdown of the release suggested an improving jobs market. The rate of unemployment was left unchanged at 6.7 per cent, which was worse than the forecasted dip to 6.6 per cent. The data coupled with news of the ECB embarking upon QE measures has helped to lift the US dollar to one-month highs against the euro.
Euro
The ECB could be closer to QE than many expect, with reports that the central bank has mapped out a plan for its QE programme. On the other hand there are also reports that arguments remain over whether QE takes pressure off the politicians that need to make structural reforms. The single currency could get a small break when German industrial output is released. The health of the orders number might bode well for the output and could lend a hand to the euro. Further the Sentix sentiment indicator rose last month to near two-year highs. Another upbeat release for the month of April could provide another opportunity for the euro’s fortunes to shift.