Rational FX: Eurozone unemployment rates beat expectations [02/02/2011]

As well as David Cameron’s encouraging words, the UK also began the day with positive data in the form of a considerably better than expected PMI Manufacturing figure. With manufacturing being a considerable part of the UK GDP, a significant increase above consensus may well have helped cable in its climb to the 1.61 level and above.

In the US yesterday the only piece of data was the ISM manufacturing figure, which came out considerably better than was expected, the manufacturing sector growing at its fastest pace in seven years. This is the latest sign of economic recovery in the US and serves to strengthen the notion of risk appetite playing a key role in cable reaching and maintaining the high level just mentioned.

With unemployment rates in the EU coming out slightly better than expected, the main focus was on Trichet speaking in the afternoon. Trichet seemed mainly to focus on saying that the Euro zone needed a stronger role from the EU institutions in order to help the economy. This proved to have little effect on the market.

With no key releases of data in the UK today, the main movements involving the GBP are likely to come from further movement with relation to the USD in terms of continued risk appetite due to the generally improving confidence in the US economy.

The only key piece of data for today comes from the EU as the Producer Price Index is expected to come in higher than previous YoY. This could see the Euro continuing a positive run against the USD to levels as strong as 1.38, especially with no real market moving data for its main currency pairings in the GBP and the USD.