The pressure increased on the greenback after the bigger than expected weekly jobless claim release which came at 445k from 410 a weak earlier while the market was waiting for improving to 404k which shows that the labor market is still struggling lagged behind the other US sectors which increase the probability of having the easing stance further in US. The Japanese yen dived below 83 versus the greenback with equities selling with these disappointing data which tempered the markets optimism which contained the markets after the Japanese promises of buying European bonds this month and the successful bonds auctions in Portugal , Spain and Italy this week helping the single currency which could find another unexpected support from Trichet's reference to building inflation pressure in the Euro zone which can suggest another pressure on the ECB to cap its funding which was weighing negatively on the single currency which add more gains to reach 1.3382 versus the greenback which has started to run out of stream since the release of December non-farm payrolls which have just added 103k while the market was waiting for 135k in December and this weak jobless claim figure claim to add more doubts about the labor market performance which is always worrying the Fed and trigger its easing steps.
The British pound could also add more gains reaching 1.5881 getting use of the pressure on the greenback but it is still exposed to find it resisting pressure protecting breaking 1.5907 whereas the cable failed to pass recently forming its recent top where it has fallen to 1.534 before finding support and strength to rebound by lower than expected figure of non-farm payroll of December has hit the greenback by the end of last week after it has been under pressure because of Q4 2010 mortgage defaults value which rose for the first time since Q2 2009 and the sudden slump of December services PMI below 50 at 49.7 in the contracting territory to temper the positive sentiment towards the UK economy and the British pound which has been triggered by December manufacturing PMI rising to 58.3 while the market was waiting for the same reading of November at 57.5 which has brought back some lost confidence in the UK economy reducing some of the market discounting of adding more funds to the BOE buying bonds plan which has been kept unchanged again by the MPC with the interest rate unchanged at .5% worrying about the inflation which is still above its 2% target and above 3% in the recent months and it can accelerate to 4% yearly which by God's will can rule out any expected easing action soon from the BOE to support the economy which seems to be in need of its supporting to be under stagflation pressure this year.
God Willing, We will be waiting today for watching December EU CPI which is expected to be up yearly by 2.2% while the core is expected to be 1.1%, after Trichet's firmer remarks about the potential inflation upside risks while we will be waiting later today for December CPI figures which are expected to show rising of the broad rate by .4% while the core excluding the food and energy is expected to be up by .1% again after November US CPI coming at .1% monthly while it was foreseen to be .2% and the core figure excluding the food and energy rising by just .1% as expected after 2 months of flat reading and we also will be waiting for January preliminary reading of University of Michigan monthly consumer sentiment index to be 75.5 after getting up to 74.2 in mid December from 71.6 at the end of November while it was forecasted to be 73.
Walid Salah El Din