US Employment Figures – USD Exchange Rates

This afternoon we have the eagerly anticipated US non-farm payroll data due for release which is historically a big mover of USD exchange rates. Non-farm payroll data illustrates ths job market in the US as it shows how many people are in employment outside of the seasonally effected agriculture industry. This figure is normally very large and as a result the changes from month to month are often very large and usually very different to the predicted figure which often seems to be just a number plucked out of the air! Should the figure come out better than expected, showing more people are in work, then it can provide a lot of strength for the Dollar and may mean we see Sterling Dollar exchange rates fall from the current levels, however the reverse is also true and so weaker figure may provide a spike in GBP USD rates. Considering how flat the exchange rates have been for the past week or so today may provide a spark in the markets today, we are now very used to a lot of movement around non-farms so for anyone with a USD requriement will want to keep a very close eye on the rates in the lead up to and during the announcement.

Euro Interest Rates on Hold

It was confirmed yesterday by European Central Bank (ECB) Head Mario Draghi that interest rates would remain on hold at the record low level of 0.25%. However, as anticipated the accompanying speach from Mr Draghi was very interesting as he stated that due to the threat of deflation the ECB had discussed the merits of pumping more money into the economy, similar to the UK’s Quantitative Easing (QE) programme, and that they were prepared to use “unconventional tools” in order to prevent deflation. The fact that the ECB have not acted yet means they must be relatively hopeful that their current policies will work however I believe that they will have to act as the level of inflation is falling fast and should the economy fall into deflation then it could spell long term problems for the Euro. QE has worked to a degree in both America and the UK, in fact in the States they are currently far more confident about their economy that they are now reducing their QE programme so the chance that the Eurozone will follow suit is quite likely as pumping more money into an economy theoretically increased inflation levels although considering the size of the Eurozone it would need to be a lot of money and the long term impact of pumping money into an economy like this is still not completely known so there are risks to this. Another mooted suggestion for the ECB is that they could use negative interest rates although this would be unprecedented and could cause major unrest in the whole of Europe and really detract any investors in the single currency economy. Either way the coming months will be very interesting as to whether and how the ECB act and then what it means for Euro exchange rates.