Euro Reaches Record Against Yen Pound Seesaws as Data Mixed

[B]- Japanese Yen: IP better, consumer confidence gains

  • Euro: France sees fastest growth in six years
  • Pound: UK Labor data mixed
  • US Dollar: Housing starts, permits on tap[/B]

Euro Reaches Record Against Yen Pound Seesaws as Data Mixed
Despite EURJPY hitting yet another record high (1.6380) in early London trade, the overnight session was remarkably muted. French Non-Farm payrolls produced a nice upside surprise for euro bulls increasing 0.6% vs. 0.3% projected. The gain in French jobs accelerated at the fastest pace in six years suggesting that expansion remains on course in the region?s second largest economy. However, the EURUSD saw only limited upside from the news as traders continued to absorb yesterday 60 point gain in the pair after softer than expected US CPI figures.
The EURUSD continues to range trade between 1.3450 and 1.3650 and will likely remain contained within that zone unless one or the other of the following factors becomes clear to the market - 1). ECB willing to raise rates beyond the 4% level or 2). US economy tipping into a recession. Neither one of those scenarios can be forecast with any degree of certainty just yet which explains the meandering price action in the pair over the past few weeks.
One possible piece of news that could tilt the odds in the favor of euro longs is today?s housing data if it once again misses the already lowered expectations of the analysts. Housing continues to be the primary drag on the US economy, as evidenced by the latest earnings results from Home Depot and Wal-Mart. In fact the central argument of dollar bears is that housing will inevitably lead to a contraction of the US economy. Today?s Housing starts and Building permits data is not as important as the Existing Home Sales reports next week, but it may nevertheless provide clues to the state affairs in that critical sector.
Meanwhile in UK today the picture was no less confusing after a mixed labor market data report. UK claimant count decreased much sharper than expected by -15.7K from -5K originally forecast. Overall unemployment fell to a two year low but wage increases were more modest than anticipated rising only 4.5% vs. 4.8% projected. One piece of news therefore offset the other as traders continued to be uncertain about the possibility of another rate hike from the BoE in the near future.
In his press conference following BoE? quarterly inflation report Mervyn King appeared to straddle the fence, pointing out that at present price risks remained to the upside while also signaling that the Bank believed it would achieve its 2% target rate within two years. In short, Governor King left open the possibility of another rate hike, but offered no clues as to its timing. The market sold off on the news in the knee-jerk fashion with most speculators now believing that the BoE will remain on the sidelines for at least several months given the softer than expected inflation and wage data out of the UK this week.