Focus towards the end of last week was always going to be on the closely-watched US non-farm payrolls report and the release did not disappoint markets. The report showed that US employment conditions worsened in September and as a result the US dollar tumbled towards new record lows against sterling, the euro, Swiss franc and most notably, to new 15-year lows against the Japanese yen. This is likely to force Japanese authorities to resume their yen selling campaign, particularly since Japan received no direct criticism at this weekend’s meeting between world leaders. Elsewhere, higher producer prices in the UK raised questions about the need for the Bank of England to restart its own quantitative easing measures.

Sterling

Sterling is moving largely on broader market movements. As a result, the pound reached five-month lows against the euro, however it remains close to recent two-month highs against the US dollar. Producer price inflation levels for September rose above expectations, coming in at 0.4 per cent, above the forecasted 0.1 per cent. This was sterling positive as higher inflation reduces the Bank of England’s ability to increase quantitative easing in order to further stimulate the UK market.

US dollar

Friday’s non-farm payrolls report almost certainly confirmed that the US Federal Reserve will need to expand stimulus measures to boost the US economic recovery. Markets were expecting the US economy to have shed very few jobs in September, however, the data revealed that 95,000 jobs were lost. The US dollar immediately came under further selling pressure as a result and reached new eight-month lows against the euro.

Euro

Weak German export data was unable to halt the single currency’s ascent. The euro moved to new eight-month highs against the US dollar and almost two-month highs against the Swiss franc. Germany’s trade balance for August was expected at €12.5 billion but unexpectedly dipped below previous levels to €11.7 billion as exports fell. The news does not bode well for Germany’s export-led recovery which looks to be slowing.

Japanese yen

There was no direct criticism of Japan’s recent efforts to weaken the yen and protect Japanese exporters at this weekend’s IMF meeting between world leaders. Japanese authorities intervened in currency markets last month in what was their biggest one-day action on record. With global tensions over protectionist currency moves already simmering, it was expected that Japan could overcome pressure along with China.

Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/

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