* Euro takes hit from objections to bond-buying
* Constitutional Court also leaves door open to acceptance
* Market steadies ahead of U.S. payrolls
By Patrick Graham
LONDON, Feb 7 The euro fell back against the
dollar on Friday, hit by criticism of the European Central
Bank's bond-buying programme by a German court and by the
prospect of U.S. jobs data that is likely to underline the
contrast with a fragile euro zone.
One consensus among analysts this year is that the ECB will
have to pump more money into the financial system to prop up
growth, while U.S. officials are easing back on their own
bond-buying, weakening the euro against the dollar.
Lack of action from the ECB at a policy meeting on Thursday
led to a small shakeout of some of those bets. But the euro
retreated after Germany's Constitutional Court referred a
complaint against ECB bond-buying to the European Court of
By referring the issue on, the court may have removed the
prospect that Germany will try to curb the programme but left
the ECB unable to take action within the framework for the
foreseeable future. A halt in sterilisation of the bond-buying
has been seen by many analysts as one relatively easy way to
send more money coursing through the banking system.
"The ECB has to quickly assess what repercussions the ruling
will have for the range of tools available to calm markets,"
said Christian Schulz, senior economist at Berenberg.
"Ironically, depending on the exact decision, the court may have
made a much more wide-ranging quantitative easing programme at
the ECB more likely."
After the court statement, the euro fell as low as at
$1.3552 before recovering to $1.3566, still well off highs above
$1.36 reached after the ECB's policy statement on Thursday.
QE MORE LIKELY?
U.S. non-farm payrolls on Friday is expected to show
recovery in the world's biggest economy is on track, but there
are substantial risks to the central forecast of 180,000 in new
Disappointing figures a month ago were viewed as marred by
poor weather, which has continued over the past month. A
negative surprise from the closely watched ISM business survey
earlier this week also spooked markets.
Private payroll processor ADP's report on Wednesday showed
businesses added 175,000 jobs in January, slightly below
forecasts but still above the 74,000 reported by the Labor
Department in December.
"We think that if the number today comes in close to
consensus it could be enough to reassure the market," said Josh
O'Byrne, currency strategist with Citibank in London.
Bart Wakabayashi, head of forex at State Street Global
Markets in Tokyo, said the big picture of an end to the Fed's
bond-buying later this year was still intact, no matter what the
jobs reports shows.
"I think in general, people are in agreement that it's not a
tapering story as opposed to just a reevaluation of their
positions," Wakabayashi said.
Even if labour conditions improve, Boston Federal Reserve
President Eric Rosengren said late Thursday that the central
bank should be "quite patient" in removing stimulus because
broader measures of the U.S. labour market remain weak.
Rosengren, considered a dovish Fed official, said the labour
market conditions remain far from those which would warrant
higher interest rates.