The US labor report came mixed again in January losing further 20K jobs out of the farming sector. The manufacturing sector could add 11k jobs in January to the non-farm payroll for the first time since the beginning of this recession which caused a losing of 8.42 M until now. The unemployment of January has fallen to 9.7% from 10% in December but the non-farm pay roll of December has been revised down to -150k from -85k in the first reading.

There was a mixed impact after the data on the greenback which could keep its gains again at the end of the week underpinned by uncovered loses in the equities markets.

The loses in the equities market have increased last Thursdays on worries about the Jobs market outlook and the debt which has increased in an excessive way recently in Europe after unconvincing comments from Trichet in his press conference in Frankfurt following the ECB decision to keep the interest rate unchanged at 1%.

Trichet seemed convinced with Greece, Spain and Portugal abilities to get over their deficits problems Trichet has appreciated the current Greece efforts in fighting the consolidation of its deficit repeating that it is the same for all the European countries to take the required steps for driving down the deficit rate below 3% of the GDP as the treaty of Maastricht referring to the IMF calling for driving this ratio below just 6% and the excessive deficit of other industrial countries like US and Japan which have become more than 10% of the GDP while the 16 members of the Euro obligate themselves to keep it below 3% but this tried looked not enough to calm down the market who was strongly possessed by these worries.

The single currency has lost further after his comments which contained that inflation is anchored over the medium and the short term in the Euro zone and the growth will be moderated this year and the current interest rate in appropriate but after he has mentioned  that he is appreciate the strong dollar policy of US answering a question about the Single currency value whether it is over valued currently or not which has shown to the market that he can accept a lower exchange rate even after this recent massive falling of the single currency from above 1.51 in the beginning of last December. Also his comments about withdrawing the easing measures of the ECB for providing required liquidity for buying covered bonds have shown that there is no action by the second quarter of this year which shows that the growth in EU is still fragile and in need of further underpinning from the ECB. The single currency has broken 1.3820 directly after his comments about the strong dollar policy of US and now the next support is standing at 1.343 while the resistance is emerging just above 1.40 psychological level when it failed to break above 1.404 earlier last week as the breaking below 1.40 could add momentum to the currency downward trend and from another side, The single currency can be capped by dovish investing sentiment can underpin the greenback on the loses of the equities markets which are still looking for a bottom of the correction which has started earlier last month when Dow reached 10729.

Best wishes

FX Consultant

Walid Salah El Din
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