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Euro under pressure after ECB, U.S. jobs next test
Euro notes are pictured at a bank in this photo illustration taken in Seoul June 18, 2012.
Credit: Reuters/Lee Jae-Won
SYDNEY |
SYDNEY (Reuters) - The euro nursed heavy losses on Friday, having suffered a major setback after the European Central Bank disappointed markets by not backing up its vows to defend the euro with immediate action.
But further losses may be limited for now as investors retreat to the sidelines ahead of the closely watched U.S. non-farm payrolls data due at 1230 GMT. Markets will also be keeping an eye on HSBC's latest report on China's services PMI at 0230 GMT.
The euro was at $1.2179, having skidded nearly three cents to a one-week low around $1.2134 after the ECB indicated it may start buying government bonds to lower crippling borrowing costs for Spain and Italy, but not right now.
"The EUR/USD has taken it on the proverbial chin...following the non-news that the European Central Bank did not have a bond buying program in place," said Christopher Vecchio, currency analyst at DailyFX.
The euro also fell sharply on the yen and even lost ground against high-beta currencies like the Australian and New Zealand dollars to reach fresh all-time lows.
ECB President Mario Draghi indicated that any intervention would not come before September - and only if governments activated the euro zone's bail-out funds to join the ECB in buying bonds.
He had set the bar very high last week by declaring that the bank would do whatever it takes within its mandate to preserve the euro. Even though hopes of any tangible action gradually withered away in the leadup to Thursday's meeting, investors still reacted swiftly and viciously.
The recent highs around $1.2390/2406 are likely to become strong resistance for the euro, while initial support comes in at the 25-month low of $1.2042 set last month. The 2010 trough around $1.1876 also remains in play.
The euro's slump saw the dollar index .DXY bounce up to 83.332, from a four-week low of 82.198. Investors also sold the Australian dollar against the greenback, knocking more than a full cent off the currency. It was last at $1.0458, well off Thursday's high of $1.0577.
The greenback, however, underperformed the yen, slipping to 78.24 from Thursday's high around 78.54.
Traders said markets are now bracing for the U.S. jobs data. Analysts polled by Reuters generally expect the economy to have created 100,000 jobs in July and the jobless rate to stay at 8.2 percent.
Any upside surprise could temper hopes of more stimulus from the Federal Reserve, which earlier this week signalled it is prepared to act unless the economy stages an unlikely comeback in the next six weeks.
Such an outcome should give the dollar a boost. Conversely, a weaker-than-expected jobs number will put the greenback under fresh pressure.
(Editing by Wayne Cole)
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Just read about the tax payer morale in Italy, or their court system, or the level of bad housing credits in Spain, and it will be clear to you that only a strong central hand (EU) together with a breakup of old structures of government have a chance of resolving the situation. But such reforms are not discussed anywhere, actually less than in the beginning of the crisis.
I expect the ECB will try to find a middle way between the breakdown of the south and the Euro exit of some northern countries because of extreme inflationary pressure. But a middle way is difficult to find in these circumstances.
Just read about the tax payer morale in Italy, or their court system, or the level of bad housing credits in Spain, and it will be clear to you that only a strong central hand (EU) together with a breakup of old structures of government have a chance of resolving the situation. But such reforms are not discussed anywhere, actually less than in the beginning of the crisis.
I expect the ECB will try to find a middle way between the breakdown of the south and the Euro exit of some northern countries because of extreme inflationary pressure. But a middle way is difficult to find in these circumstances.
Just read about the tax payer morale in Italy, or their court system, or the level of bad housing credits in Spain, and it will be clear to you that only a strong central hand (EU) together with a breakup of old structures of government have a chance of resolving the situation. But such reforms are not discussed anywhere, actually less than in the beginning of the crisis.
I expect the ECB will try to find a middle way between the breakdown of the south and the Euro exit of some northern countries because of extreme inflationary pressure. But a middle way is difficult to find in these circumstances.
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