Daily Market Report 04/02/2013

Sterling suffered broad falls on Friday with the most notable move against the euro where it fell 1.8% intraday and to a 15 month low against the single currency.

Momentum for the pounds weakness continued to build with UK manufacturing output growing less than expected in January as well as more rumours circulating that the UK may lose its treasured AAA credit-rating.

As well as climbing to a 15 month high against the pound, the euro reached a 14 month high against the US dollar. The singe currency drew support from euro zone manufacturing rising higher than market expectations in January, as well as figures showing inflation and unemployment had stabilised in the region.

Figures from the US Department of Labour showed that the economy added 157,000 jobs in December, below market expectations for a rise of 160,000, while the unemployment rate increased from 7.8% to 7.9%. Policy makers at the Federal Reserve will no doubt be unimpressed with the figures, adding to the Fed’s notion that stimulus will continue until an improvement is seen in the recovery of the job market.  Data on Friday also revealed that US manufacturing rose to a nine month high in January as well consumer confidence rising more than expected.

The euro has started the morning on the back foot amid allegations that Spanish Prime Minister, Mariano Rajoy and a number of senior officials of the Popular Party had been receiving secret payments for over two decades. The news seems to have unsettled the markets, with Spanish bond yields rising from 5.21% to 5.34% and thus causing the euro to weaken. The political scandal may give scope for further euro weakness as investors may use the news to book profits following the euro’s impressive gains last week.

Key Announcements:

8.00am – EUR – Spanish Unemployment Change: Beat market expectations with only 132,100 claiming for benefits instead of an expected 150,000.

9.30am – UK – PMI Construction (Jan): Expected to rise to 49.1.

9.30am – EUR – Sentix Investor Confidence: Expected to rise to -3.

10.00am – EUR – Producer Price Index: Expected to rise to 2.2%.

12.00pm – EUR – Rajoy and Merkel Meeting.

15.00pm – USD – Factory Orders: Expected to rise to 2.2%.