EUR Weaker Vs US Dollar (USD) As Investors Seek Sterling GBP
London (June 8) The Euro was weaker against the US Dollar exchange rate on Friday as the currency remained under pressure from yesterdays European Central Bank policy meeting. The ‘Greenback’ meanwhile found support from a positive non-farm payrolls report. The EUR managed to recover some ground early in the session easing away from a four-month low against the USD as the markets came to terms with the ECB’s introduction of new monetary easing measures which ranged from an interest rate cut to hints of the use of quantitative easing if the low inflation situation in the Eurozone continues to deteriorate.
Speaking at the ECB’s post-policy meeting press conference, Draghi also said that the central bank we will be conducting a series of Targeted Longer Term Refinancing Operations (TLTROs), to support bank lending. The Euro exchange rate was weakened against many of the world’s riskier assets as investors sought higher yielding locales to deposit their cash. Currencies such as the Australian Dollar (AUD), New Zealand Dollar (NZD) and South African Rand (ZAR) all benefitted. “If you have a central bank that’s moving toward more easing like the ECB it just gives another green light toward the high-yield market. If we look back at what huge amounts of easing from various central banks have done in recent years it has promoted asset-price inflation and confidence into high-yielding markets,” said a senior currency strategist at Rabobank. The Euro then went back on the retreat in the afternoon after data showed that the US economy created 217,000 jobs in May, adding to the downwardly revised figure of 282,000 recorded in April.
The data also showed that the private sector added 216,000 jobs last month, beating expectations for a rise of 210,000 after the downwardly revised figure of 270,000 in April. Despite the positive data the US Dollar briefly weakened against several currencies as investors bet that signs of improvement in the US jobs market will not be enough to warrant the Federal Reserve raising interest rates. “Because we’re right in line with the consensus it doesn’t really give you much in terms of how the Fed’s view point will change,” said Brian Daingerfield, currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities “We’re due for a pretty muted close out to the week after a number that came basically in line with where the economists and where trend has been in terms of U.S. job growth.”
The ‘Greenback’ did manage to make gains against the Pound after a report showed that the UK’s trade deficit widened more than expected last month and as the Bank of England said that its expects consumer inflation to fall next year from 2.8% to 2.6%. The US Dollar was holding ground against the Australian Dollar, New Zealand Dollar and Canadian Dollar exchange rates.