Losing handsomely against the euro and pound sterling in New York, the US dollar continued to give up ground for the second straight session following a disappointing US unemployment report. Although the release did fall short of the whisper number of a 600,000 shortfall, it wasn’t by much. According to the US Labor department, payrolls shrank by an impressive 598,000 positions with last month’s figure being revised lower to a 577,000 loss. The corresponding unemployment rate ratcheted higher to 7.6 percent, setting a 16-year high for the figure. As a result, the majority now continues to eye the passage of a stimulus package still being deliberated on by Senate lawmakers in relieving some of the economic disappointment. Should an impasse still remain heading into the weekend, current USD bearishness is likely to persist (even if there is an emergency Sunday session called). One positive consideration will likely be an announcement by Treasury Secretary Geithner on Monday regarding new support for the financial system. Although rumors have ranged from new massive capital injections to the specter of a bad bank, it remains that the announcement will still help at least alleviate some of the stigma surrounding the sector and add to an interim USD turnaround.

Manufacturing in the UK Declines
Although appreciating against the USD in the New York trade, previous sterling gains were capped by an earlier sign of continued weakness in the UK industrial sector. In the month of December, UK manufacturing production dipped by 2.2 percent in the monthly comparison, which was worse than the -1.3 percent expectation. Although the report reaffirmed the slowdown in the UK economy, the underlying spot continues to be supported by the notion that interest rate cuts will likely help the country bounce back from a historic recession. At the same time, speculators are also looking for the last round of 50 basis points to potentially be the last, helping the pound retain some edge against the USD. The sentiment is helping the queen’s currency to remain higher for the 9th straight session of 10.

Tags: Forex Commentary, UK Manufacturing, US Dollar, US NonFarm Payrolls, US Unemployment

This entry was posted on Friday, February 6th, 2009 at 2:11 pm and is filed under British Pound, Currency Trading, Economic Indicators, Euro, US Dollar. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.