The Euro dipped to lows near the 1.2740 region in early Europe on Friday, but found support close to this region and consolidated near to 1.28 ahead of the US data.

The Russian rouble managed to stabilise on Friday and the central bank's assertion that it had not intervened significantly during the week also provided some degree of Euro support.

The German industrial data was weaker than expectations for the second successive day as production fell by 4.6% in December after a decline of 3.7% the previous month. The data will maintain fears over the Euro-zone industrial sector and confidence in the ECB policies will remain fragile.

The US labour-market data remained very weak again with a 598,000 decline in employment for January following a 577,000 decline for December and this was the sharpest monthly decline for 34 years. Manufacturing employment was notably weak with a 200,000 monthly decline. The unemployment rate also continued to rise strongly to 7.6% from 7.2% previously. The labour-force survey pointed to extreme conditions with a reported decline in employment of over 2 million for the month.

The very weak employment data will maintain pressure for fiscal action to help support the economy and Senate negotiations will continue in the short term. Wall Street rallied on expectations that the pressure for action would lessen barriers to the fiscal stimulus plan. The Euro gained from an improvement in risk appetite and a surge in debt issuance, with a peak close to the 1.30 level before a retracement.

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Bank of Japan Governor Shirakawa continued to warn over the conditions with comments on Friday that the economy is in a very severe state. Leading indicators also weakened further in the latest release, although the decline was slightly better than expected. There will be further pressure on the Japanese authorities to take further action and weaken the yen.

Uncertainty over the US payroll data and the fiscal stimulus bill caused uncertainty on Friday and the dollar edged slightly weaker. Given very weak expectations, risk appetite did not weaken sharply following the US data and the dollar pushed higher in New York. The yen lost ground against the Euro on reports of corporate buying interest and the Japanese currency also weakened to lows just beyond 92 against the dollar.


Sterling maintained a generally firm tone during Friday as the underlying pressure for a correction stronger continued.

UK industrial production fell 1.7% in December after a revised 2.5% decline the previous month, maintaining fears over the economy, and this was the worst performance since 1981. There will also be fears that the GDP estimate could be revised down although the impact should be limited given that the industrial evidence was already depressed. The global industrial data has also been extremely weak.

The cost of raw material prices also rose for January, reinforcing the impact of recent Sterling weakness and this may make the Bank of England slightly more cautious over the impact of Sterling weakness.

The bank announced that it would begin using the GBP50bn asset purchase under the asset purchase programme on February 13th. As risk appetite improved, the UK currency pushed to fresh two-month highs beyond 0.87 against the Euro while there was a peak above 1.48 against the dollar.

Swiss franc

The franc was unable to strengthen through 1.16 against the dollar on Friday and weakened to lows near 1.1750 before finding fresh support. The franc drifted weaker against the Euro to lows beyond 1.5050.

The seasonally-adjusted Swiss unemployment rate edged higher to 2.9% in January from 2.8% which was in line with expectations.

National Bank member Jordan stated that the bank was watching exchange rates closely and that a weaker currency would be helpful. There have been a steady stream of bank comments warning over exchange rates and this will remain a negative factor for the Swiss currency.

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Australian dollar

The firmer Australian dollar trend persisted in local trading on Friday. The Reserve Bank stated that conditions already in place would lead to a recovery in conditions and these comments dampened speculation over an aggressive Reserve Bank policy to cut interest rates further. The Australian currency pushed to near 0.66 against the US currency with some optimism that aggressive international action will underpin the global economy.

Risk appetite proved resilient following the US data and this pushed the Australian dollar significantly higher with a peak near the 0.68 level as the US currency also came under wider selling pressure.