Friday’s blockbuster non-farm payrolls data release lived up to expectations and this time returned a much better than expected measure of US employment prospects. Consequently, riskier assets such as the euro continued to attract yield thirsty investors while the pound also managed broad based gains. Sterling’s advance was particularly dramatic having earlier suffered relentless selling pressure in the wake of the Bank of England’s shock £75 billion quantitative easing boost for the UK economy. However, eurozone developments have again shifted market sentiment from one extreme to another since last week which should help limit any unwinding of defensive currency positions. Rating agency Fitch surprised investors by cutting its debt rating for both Italy and Spain. Germany and France announced that that they are making progress towards a wide-ranging resolution to solve the area’s debt crisis and have also promised a deadline of October end for those measures.
Sterling
Sterling has produced a remarkable turnaround since the Bank of England caught markets off-guard with its £75 billion quantitative easing injection. A growing number of investors now believe the controversial measure will help revive a faltering UK economy and as a result, the pound retraced a significant chunk lost ground.
US Dollar
US non-farm payrolls rose by a more comforting 103,000 in September which also helped keep the nation’s unemployment rate steady at 9.1 per cent. While the data will help soften worries of another US recession, the world’s largest economy still needs to create around 250,000 new jobs per month in order to make any positive impact on overall unemployment levels. Regardless, markets cheered the news and consequently shunned the more defensive US dollar in favour of more riskier assets such as the pound, euro and Australian dollar.
Euro
The euro ran into strong resistance after amassing some noteworthy gains in previous sessions. After the European Central Bank announced more monetary support for euro banks, better than expected US employment data then followed which helped dampen growth fears. This had encouraged a little more risk taking which continued to provide support for the single currency.
Japanese yen
The Bank of Japan gathered to asses its monetary policy but decided to hold its target rate unchanged at a range of zero to 0.1 per cent. The Japanese central bank also retained the volume of its asset purchasing scheme at 15 trillion yen, which equates to approximately £126 billion.
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