US Employment Data Boosted Demand For Refuge | IFCM India
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US Employment Data Boosted Demand For Refuge - 11.7.2011

US Dollar Asian stock markets fell under pressure, following US stock declines on Friday as US unemployment unexpectedly increased, boosting concerns about global economic recovery outlook. In foreign exchange markets traditional refuge currencies gained ground. Both Swiss franc and Japanese yen strengthened against the dollar on Friday, touching a week high. The Labor department said on Friday US payrolls increased by 18000 in June, less than the most pessimistic forecast, compared with an average estimate of a 105000 increase. The unemployment rate unexpectedly increased in its turn to the highest level in 2011 – 9.2%, according to the government report. A number of important economic reviews is expected to be released this week as well. The retail sales data on Thursday may also show sales excluding automobiles and gas stations rose by 0.4% last month after increasing by 0.3% in May, according to expectations. On Friday US consumer price index is expected to decline by 0.1% from May to June, but to remain unchanged in annual figures at 3.6%. The Federal Open Market Committee is also scheduled to release on Tuesday the minutes from its June 21-22 meeting, when policymakers decided to keep record stimulus and Fed Chairman Bernanke said the economy is recovering at a “moderate pace.” Another investors’ concern comes from US government debt issue, which is also contributes to labor market pressure. Companies may be hesitant to hire more workers because they lack clarity of future fiscal policy and government spending as President Barack Obama negotiates budget cuts with Congress and the US reaches the limit of its borrowing authority of 14.3 trillion dollars. The debt has already reached 96.5% of GDP in 2010 and is expected to increase above 100% in 2011. Speaking at the White House Obama concluded that the recend data shows that “we still have a long way to go and a lot of work to do to give people the security and opportunity they deserve.” The Dollar Index, which tracks the currency against those of six trading partners, rose to 75.45, the strongest since June 28. Euro The euro weakened to a two-week low against the dollar, the yen and Swiss franc amid speculations the European debt crisis may spread to Italy as policy makers remain divided on how to structure aid for Greece. The euro fell under pressure after an article reported that the European Central Bank is seeking to expand a fund to include help for Italy, following a coordinated rescue for Greece by the European Union and International Monetary Fund, according to Bloomberg. The bailout fund may be raised to 1.5 trillion euros to cover a possible crisis in Italy. Italian government bonds’ yields meanwhile rose to 3.49% for two-year papers and to 5.13% for ten-year bonds, compared with German 1.44% and 2.82% respectively. At the same time EU leaders are discussing today plans to provide Greece with a second bailout package. The gathering comes as Europe continues to struggle with a contentious issue: whether and how Greece's private-sector creditors should share the burden. Pair EUR/USD remained under pressure this morning, touching its lowest since June 27 – 1.4181.
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