Currency news - Pressure for US fiscal action

Pressure for US fiscal action - 09-02-09

The Euro dipped to lows near the 1.2740 region in early Europe on Friday, but found support close to this region and consolidated near to 1.28 ahead of the US data.

The US labour-market data remained very weak again with a 598,000 decline in employment for January following a 577,000 decline for December and this was the sharpest monthly decline for 34 years. Manufacturing employment was notably weak with a 200,000 monthly decline. The unemployment rate also continued to rise strongly to 7.6% from 7.2% previously. The labour-force survey pointed to extreme conditions with a reported employment decline of over 2 million for the month. The very weak employment data will increase demands for urgent supportive action.

Wall Street rallied on expectations that the pressure for action would lessen barriers to the fiscal stimulus plan. The Euro gained from an improvement in risk appetite and a surge in debt issuance, with a peak close to the 1.30 level. The Euro retreated towards the 1.29 region on Monday in choppy trading as markets continued to focus on congressional negotiations over the stimulus and the Administration’s financial reform plans.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

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