* UK Manufcaturing plummets -2.9%
* BOK lowers rates by 50bp to 2.5%
* Russia and Europe arrive at agreement on gas pipeline conflict
* Bombay goes through volatile session after Satyam fraud
* Oil hovers at $42 as Mideast tension continue
* Gold at $850/oz
* European equities slightly lower ahead of NFPs
* JPY Leading Indicators 81.5% vs. 81.4% forecast
* EUR German Retail Sales better at 0.7% vs. 0.4% forecast
* EUR French Industrial Production -2.4% against -0.7% called
* EUR French Trade Balance meets forecast at -6.2B
* GBP Manufacturing Production drops -2.9% vs. -0.5% expected
* GBP PPI in line at -2.0%
* GBP Industrial Production -2.3% vs. -0.5%
* EUR Retail Sales 0.6%
* EUR German Industrial Production n/a
Event Risk on Tap
* CAD Employment Change expected at -21.0K
* CAD Unemployment Rate expected at 6.5%
* CAD Housing Starts expected at 175K
* CAD Building Permits expected at -3.7%
* USD Non-Farm Employment Change expected at -475K
* USD Unemployment Rate expected at 7.0%
* USD/JPY breaks 9100 as risk aversion continues ahead of NFP
* AUD/USD sells of to 7020 as equities drop
* GBP/USD back to 1.5100 on woeful manufacturing but recovers all losses
* EUR/USD rangebound around 1.3700 as marktes await NFP
UK manufacturing plummeted by -2.9% against forecast of only -0.5% dragging pound lower in early London trade, but the unit managed to recover most of its post news release losses as focus shifted to the US Non Farm payroll report due later today at 13:30 GMT. Part of the reason for currency market's rather nonchalant reaction to the worst UK manufacturing reading since 1981 may have to do with the fact that the manufacturing sector comprises a relatively modest percentage of the UK economy which is much more service oriented than the large economies of the Eurozone.
Nevertheless, the woeful state of UK industrial sector only serves to highlight the severity of the country's recession and suggests that further rate cuts from BoE will likely be forthcoming. Pound tumbled to within a few points of the 1.5100 level in the aftermath of the release but managed to recover virtually all of it losses, although the unit remained weaker against the euro with EURGBP climbing back above the 9000 level. Today's German retail sales data surprised to the upside printing at 0.7% versus 0.4% forecast and provided with euro with a bit of a lift as the unit climbed above 1.3700 ahead of the US jobs data.
The NFPs of course will be the marquee event of the day with traders steeling themselves for a possible -700K print. The last two month losses of more than 1 Million jobs would be the worst performance on the US labor front since 1946 but that fact must taken within context as the country's population was nearly two-thirds smaller at that time , making today's data not nearly as dramatically dour on a percentage basis.
While the market is almost universally bearish the NFP number after ADP's -693K projection on Wednesday, the possibility of a less negative result certainly exists. As our colleague Kathy Lien noted , 'The employment component of Service sector ISM, which is one of the most reliable leading indicators for non-farm payrolls improved in December along with the University of Michigan Consumer Confidence Index, ' suggesting that the NFP print may not be as bad as currently feared.
Given the negative sentiment that prevails a reading of -500K may prove to be dollar positive with EURUSD sliding back towards the 1.3600 level, but overall the US economic picture remains woeful and the market will need to see at least some cessation of further job losses before traders can be confident that US economy has stabilized.