Yesterday was another very lively one with all manner of reasons for traders to be active. You will perhaps have seen the Pound recover some strength against the Euro after the European Central Bank left its base interest rate on hold and ECB President Jean Claude Trichet said inflation would remain contained in the medium term. As traders scaled back their expectations of EU interest rate hikes, the Euro weakened against most other currencies. The heads of the Eurozone countries are meeting this weekend and there are rumours that they may restructure the €440 billion support fund. Ahead of that meeting German Chancellor, Angela Merkel was quoted as saying "Spain has really done its homework and for that reason I think Spain is on a very good path," when someone at a press conference asked if Spain could rule out any chance of the need for a bailout package. IF that sets the tone for the weekend and we are to be assailed with positive messages from the meeting please don’t be surprised if we come in on Monday to a stronger Euro again.

The US Data was also strong yesterday ahead of today’s employment report which is expected to show another significant rise in jobs. That would be a relief to Federal Reserve Chairman Ben Bernanke who said last night that "Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established". His caution is understandable; US data has been improving but we haven’t yet seen that translate into significant employment increases. He added that "The economy, although it does look to be growing more quickly, is still in a deep hole." The US IS not alone in that though.

Other economies have been worryingly slow to recover but I guess that was always going to be the case in the UK as the government’s spending cuts and tax hikes start to hit home. However, a very positive rise in service sector activity, as reported in yesterday’s Purchasing Managers Index, does bode well for the future because, as we all know, the service sector is by far the largest sector of the economy. Traders ‘liked this’ in a facebook kind of way and bought the Pound. Sterling had a good day; strengthening against all but the so called ‘commodity currencies’. i.e. the currencies from countries which rely heavily on commodity output.

The Australian Dollar was stronger during the day yesterday as commodity prices rose again but it gathered even more strength overnight when the Reserve Bank of Australia upgraded its growth forecasts for the last half of the year because they see the rebuilding in Queensland boosting economic activity. That is stating the blindingly obvious to a large degree but traders are simple folk and they bought into the news. The New Zealand Dollar recovered some of its losses from the previous night as commodity prices rose; boosting the value of NZ exports and the Canadian Dollar did likewise. However, some of the Canadian Dollar’s strength is derived from its reliance on the US economy as an export market and the expectation of improved US employment data due later today.

Today also marks the start of the 6 Nations rugby tournament for 2011. We will get a chance to see if England has learned anything since the southern hemisphere tourists came calling. I sincerely hope so because it is about time England won the grand slam. Come on England...a bit of consistency please.


Quote

The will to win, the desire to succeed, the urge to reach your full potential... these are the keys that will unlock the door to personal excellence.
Confucius