US Dollar strength dictated global currency markets overnight, as investors found little comfort in the latest jobs data with equity markets snapping a six day winning streak. Initial Jobless Claims for the week of November 7th came in better than expected falling to 502,000 against expectations of 512,000. The number of people claiming unemployment benefits on an ongoing basis also fell. Although the economy is seeing glimpses of a recovery evident in last night's jobs data, the bane on the economy still remains with record unemployment, which hit a 26 year high of 10.2 per cent in October. Recent days has seen equity markets strengthen, as Fed official Richard Fisher suggested the Central Banks current stance on interest rates could remain into 2011 as inflation and economic growth are likely to remain below desired levels. But is this enough to combat the dire unemployment situation going forward? Increasingly we are seeing renewed calls from economists to inject the US economy with another shot of stimulus, before unemployment threatens to hamper a sustained recovery.
To the UK and the latest comments by Bank of England governor Mervyn King remains at the forefront of investors' minds. Governor Mervyn King told reporters at a press conference the bank will keep an open mind towards expanding the quantitative easing program, which to date has seen GBP175b injected into the economy with a further GBP25b committed last week. The premise of continued support of the UK economy suggests the UK economy is struggling to recover.
Mild signs of growth from Europe as Industrial production increased 0.3 percent however less than the 0.5 per cent expected, representing a decline of 14.1 per cent on the year. The Euro is currently buying US$1.4845 down 139 pts on the day.
Locally, the Aussie dollar has retreated from the post jobs data euphoria of yesterday, governed by the latest burst of energy on the greenback. At the time of writing the Aussie dollar is buying US$.9230 a far cry from yesterday's month highs of US$.9372 on the back of employment data, which showed the Australian workforce increased by 20,100 for the month of October, against the predicted decline of 10,100.
This is just the latest string of data, signaling the end of emergency level interest rates. In recent times Reserve Bank Governor Glenn Steven's has painted a very clear picture of the RBA's stance on monetary policy stating The period of greatest weakness in the Australian economy is probably past. Barring another serious international setback, the economy is likely to continue on a path of gradual expansion during 2010. This latest Jobs data increases the likely hood of the RBA following through with a third consecutive interest rate hike in December's meeting.