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Home » Online Forex Trading Blog » Jobs In US, Pro-Growth Gains Momentum In Europe

Jobs In US, Pro-Growth Gains Momentum In Europe


Jobs In US, Pro-Growth Gains Momentum In Europe

The economy and the USD received a boost Friday when the US Labor Department released its April non-farm payroll report with unexpected good news. Markets reacted swiftly, pushing equities and the USD higher.

Across the pond, the news was not as good. A statement by ECB policymaker, Ewald Nowotny, that the ECB was “open-minded about taking deposit rates into negative territory,” and that “the negative deposit rate was not relevant” sent the euro spiraling down.  Nowotny seemed surprised by the market reaction to the closely monitored currency. But, the euro appears to be teetering and any headline is news in a currency that has investors edgy to start.

The uneasiness was not made any more comfortable by press releases and announcements from Brussels early Friday morning. Projections for four of the euro zone’s largest economies; France, Italy, Spain and the Netherlands, were disappointing. All four economies will be in recession for the rest of the year.

The leading economy, Germany, will struggle to squeeze any growth from its sagging manufacturing sector. Lagging trade in the region may push Germany and Chancellor Angela Markel to adapt a pro-growth strategy.

The European Commission announced that the economy across the euro zone would shrink by 0.4 percent this year. Projections are that the region’s economy will expand 1.2 percent in 2014.

European Union Economic and Monetary Affairs Commissioner Olli Rehn told Reuters; “In view of the protracted recession, we must do whatever it takes to overcome the unemployment crisis in Europe. The EU’s policy mix is focused on sustainable growth and job creation. Fiscal consolidation is continuing, but its pace is slowing down. In parallel, structural reforms must be intensified to unlock growth in Europe.”

While austerity has helped soothe investor concerns to a degree, the economy is paralyzed in an environment where growth has been discouraged by policy. There is growing momentum for easing of austerity and increased focus on new growth initiatives, especially in the area of SMEs.

After gaining some strength in mid-week, the euro trended down to the familiar $1.30 level after reaching $$1.3125 before Nowotny’s statement. Yes, headlines can move the markets that quickly, especially in the euro zone.

The combined euro zone debt will decline by 2.9 percent of GDP in 2013. In 2014 the deficit is expected to be 2.8 percent. In 2012, the deficit was 3.7 percent of GDP.

US Employment Stronger Than Expected

The April non-farm Labor Report from the Labor Department caught analysts by surprise. Payrolls increased by 165,000 jobs in April. Additional improvements to March totaling 50,000 more jobs and adjustments to February when new jobs totaled 332,000 further helped to reduce the unemployment rate to 7.5 percent, down 1.0 point.

The average hourly wage increased by $0.04. The average work week fell below the nine-month high of February. The newly adjusted February figures makes that month the highest new job creation month since February 2010.

Equity markets reacted quickly. All three major averages moved sharply higher at the opening bell. Markets were anxiously awaiting the report because Wednesday’s ADP reports indicated a weaker trend. After the report, the dollar jumpred 1.3 percent aginst the yen to 99.18.

The announced figures come on the heels of the Federal Reserve’s decision to keep all options open to help the economy. Had the report been worse than expected, the Fed was poised to act.

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About the Author -

Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses. Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.

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