Browse
related articles
By Gaurav Kashyap, Head of DGCX Desk at Alpari ME DMCC
Along with the weakening employment rate, markets also took solace from the fact that last month's reading of 120K was revised upwards to 154K. A closer look at the figures show that hiring in the private and manufacturing sectors also came in at 130K and 16K respectively, falling well short of expectations of 165K and 20K respectively. Markets took the figures with a touch of salt - the weaker than expected figures dragged down US equity markets and saw the risk off trade boost US treasuries and pull the majors lower against the Greenback.
The short term takeaway of the report will see good demand for safe havens such as the US Dollar. In the long term, and what's more troubling for the US Economy (and President Obama as he enters into the stretch to November's elections) is the fact that the employment picture in the US still remains anemic. The overall number in the labour force dropped by 522K and the participation rate dipped to 64.3%, the lowest level in 30 years. With less people taking part in the labour force - that one saving grace - the falling unemployment rate - can be very misleading.
Quantitative Easing back in the spotlight
Surely this will re-spark debates and rumours in the weeks ahead that the Fed needs to introduce additional easing measures - measures which they have been staunchly against since their last program expired. However Bernanke's comments from the FOMC rate decision last week that the Fed were "prepared to do more" will keep optimism alive that QE3 is on the way, although we feel that larger losses in US equities will lead to the move. Also of note from this week's US calendar was Tuesday's ISM index for manufacturing which trumped expectations at 54.8 (Exp 53.0, Prev 53.4).
ECB retains rates
Across the pond, the key event was the European Central Bank rate decision which was unchanged at 1.00%. In his statement, ECB President Draghi maintained that inflation is likely to stay above the target 2% in 2012 (Tuesday's data showed that inflation across the Euro-zone came in at 2.6%) and that the latest survey indicators for the Euro area "highlight prevailing uncertainty," and that the economic outlook "continues to be subject to downside risks."
The Euro popped up slightly following Draghi's comments that European policy makers hadn't discussed lowering rates but the pair neutralized around the 1.3150 channel. It was a host of purchasing manager index data from across Europe on Friday which sucked risk sentiment out of Euro bulls and took the pair to its closing of 1.3084. German PMI slowed to 52.2, Exp 52.6, Prev 52.6 while the overall PMI composite for the Euro-zone languished at 46.7, Exp 47.4, Prev 47.4 (a reading below 50 represents a contraction and vice versa).
Earlier in the week, a contracting Spanish GDP reading (YoY -0.4%, Prev 0.3%) contributed to Euro weakness. It's going to be a big week for the Euro-zone as both Greek and French voters head to the polls this weekend. France enters its second round of voting and the political situation doesn't seem as volatile as what we are expecting to see in Greece.
Greece's general election on Sunday will be a volatile event for the markets. The majority of seats are up for grabs and the most recent exit polls hint to a lot of potential uncertainty in Greece - the two main parties the PASOK and the New Democracy are controlling around 38% of the vote with several individual parties making up the rest of the ballot.
Staff
