The pound dropped against the euro and the dollar during morning session after report showed UK job creation accelerated in June. Lloyds employment confidence gauge improved to –50 in June from the –52 in the previous reading. In addition, the Reed Job Index (Britain’s largest recruitment website) rose to 125 from 121 in May as insurance and engineering companies increased hiring. Separately, PMI Construction release consolidated slightly to 53.6 in June after reaching 54.0 in May. Looking ahead to this week, the main event is the Bank of England policy announcement on Thursday. Market participants expect base rate and the stock of asset purchases to remain unchanged in July and are betting that central bank will raise borrowing costs in May 2012. Also scheduled for this week is the industrial production release, with the expectations for the figure to recover partially in May, rising by 1%. In terms of other data, services PMI is scheduled for Tuesday, and it is broadly expected for the figure to deteriorate further in Jun.
The euro dropped against its major rivals during the overnight session after Standard & Poor’s said a debt-rollover plan from Greece may prompt “selective default” rating for the country. On the other hand, the single currency was supported last week on speculation that European Central Bank will increase their base interest rate for second time this year on their July meeting scheduled for Thursday. Positive euro sentiment was undermined by S&P’s negative comments leaving European currency exposed to volatility. Also scheduled for this week is the final reading of first quarter GDP, which is forecasted to confirm that the economy rose by 0.8% to a 2.5% yearly growth rate.
The dollar is mixed this morning, consolidating slightly against the pound, but gaining against the broadly weaker as investors switch for safety of US currency. Attention in US this week will be on the non-farm payrolls report (Friday), with the expectations for the number of jobs created in June to reach 100,000 after creating only 54,000 in the previous month. The Jun unemployment rate is also expected to remain unchanged at 9.1%. Analysts believe that the labour market tends to lag behind developments in overall growth and is likely to reflect the soft economic picture of the past two months.
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