European Unemployment To Hit New Record

The central bank meetings from the UK and Europe later in the week are looming large on the horizon and markets are happy to bide their time to make their next move it seems. The dearth of news yesterday only reinforced this.

Overnight we have seen the Japanese take yet another step to weaken the yen. Finance Minister Aso plans on buying debt issued by the European Stability Mechanism; this will help weaken the yen and strengthen Europe, or so the plan goes. There has not been too much reaction in FX circles as the money to do this seems to be coming from USD reserves and not from additional printing. There was a spike in EURUSD, GBPUSD and USDJPY immediately after the announcement but the gap was filled quickly. The next real signpost for JPY will be the Bank of Japan meeting due on Jan 20th where the central bank is expected to go full noise to continue to weaken the JPY.

General risk has been taken lower following the publication of the latest round of German export number that showed a larger fall than had been expected. Exports slipped by 3.4% in November against a prediction of a 0.5% decline. While extra-EU imports retain some backbone the recession within the Eurozone has hampered sales within the continent. We also receive German factory orders today and while they are also likely to be poor we think that the bottom may have been found for the German economy and the next few quarters, while not filled with growth, should not show too much more deterioration.

For a wider look at the travails of the European continent a ready summary will be found in the latest unemployment figures due at 10am. Predictions are that we will see yet another record level of joblessness with the rate increasing to 11.8%. European retail sales and consumer confidence are also due and it would be foolish to expect anything that doesn’t reinforce the continued deterioration of wider economic prospects.

Ranges seem to be in play once again this morning as they were yesterday. Risk did slash higher on the news that Silvio Berlusconi will not assume the PM role, were his coalition to be victorious at next month’s elections. The collective sigh of relief was worth about 40pips in EURUSD.

Our next webinar is due this Thursday and with the fiscal cliff out of the way for at least a couple of months we turn our attention to what else could influence rates through the 1st quarter. We’ll take a look at the Italian elections, a possible downgrade of the UK’s credit rating and the increased chances of a Spanish bailout alongside a rundown of our expectations and predictions for the next year. Click here to register.