The focus in the currency markets was Europe overnight, with the ECB and BoE releasing interest rate decisions. As anticipated the European Central Bank kept bench mark interest rates at 1.0 percent. Considering the European economy is showing strong signs of recovering, ECB president Jean Claude Trichet presented a very contained view of economic growth going forward, opting for more a conservative tone stating the economy recovery will be moderate and uneven.” Continuing the recent theme of positive economic data, overnight Europe’s largest economy Germany released factory orders which rose 3.2 percent in June against estimates of a more subdued rise of 1.5 percent. This represents an annual growth rate of 28.4 percent. In the hour that followed the Euro rose to highs of US$1.3235 before settling back through the US$1.32 levels – At the time of writing the Euro is buying U$1.3180.

BoE also kept interest rates at 50 bps with no change to the GBP200 asset purchase program. Sterling broke US$1.59 in the wake of the interest rate decision before settling back to lows of 1.5823 over the course of trade. At the time of writing sterling has pared losses trading just shy of US$1.59 the figure.

The USD was broadly weaker overnight as investors geared up for tonight’s non-farm pay roll data. US investors are really battling with these mixed indicators on the jobs front, we had good ADP jobs figures on Wednesday, however the weekly jobless claims released overnight showed the number of US citizens seeking unemployment benefits rose to a three-month high. This marked a strong decline in the risk barometer that is the USD/JPY pair which fell to a low of 85.8 in the 15 minutes that followed.

Aussie dollar activity was largely reactive to this cautious undertone. The lack of support for the greenback ahead of tonight’s employment data saw the Aussie rise to highs of 91.65 US cents. At the time of writing the Aussie is buying 91.5 US cents leading up to the RBA’s monetary policy statement due for release at 11.30 AEST. Investors will be looking closely for any clues where the RBA see’s growth going into 2011 and of course where underlying inflation is heading. This will no doubt spark another round of interest rate speculation in the unlikely event we see any major revisions to the RBA’s view of growth going forward.