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The pound is heading for a fourth weekly gain against the Dollar and Euro after BoE left rates unchanged at 0.5% and kept the asset purchase program unchanged also. Focus will turn to the quarterly Inflation Report to be released on August 11 and minutes to be released on August 18.

The dollar is on the defensive after reaching a three and a half month low against a basket of currencies after weak U.S jobless claims figures heightened worries that Friday’s payroll data due for release this afternoon could paint a bleak picture of the U.S. economic recovery. Yesterday U.S labour department reported that the number of Americans filing for initial jobless benefits rose 19k to 479k, the highest since early April. Markets are expecting non-farm payrolls to shed 65k jobs in July following the 125k jobs lost in June. The unemployment rate is forecast to edge up to 9.6%, up from 9.5% in the previous month, a weak reading could fuel talk that the Federal Reserve may consider additional easing steps.

ECB left rates unchanged at 1% for the 16th consecutive month as widely expected. President Trichet said in the press conference that current rates are “appropriate” and expects “price developments to remain moderate”. Economic data in Q3 were so far “better than expected” but Trichet warned again that recovery will be “moderate and uneven”. There is no change in markets’ expectation that ECB is in no rush to remove policy accommodation any time soon.

Today is all about US non-farm payrolls but firstly there are some UK and Eurozone numbers to negotiate. A large gap between producer input and output prices is expected to remain and industrial production is anticipated to have slipped from the previous month in both regions. Non Farms is anybody’s guess after the divergent numbers over the last couple of days. The market looks for an improvement from last month’s -125,000 but it will be from the Private Payrolls component that the markets will be hoping to see a strong out-turn.

Discuss on this on the Currency Exchange Forum