Intraday Market Thoughts

Sterling Joins Risk Bounce Despite 17-yr Jobless High

by Patrik Urban
Oct 12, 2011 12:34

Eurozone industrial production robust; UK Claimant count declined but unemployment highest since 1994. Market turns to Canadian new housing price index, FOMC minutes and speeches by ECB president Trichet and FOMC members Plosser and Fisher. New Premium Intermarket Insights are up. EURUSD, EURJPY, EURGBP, USDCAD, AUDCAD ESZ, CL and silver.

Improved global appetite leads emerges as markets expect Slovakia to pass EFSF within a few days. This notion is supported by Angela Merkel's comments that she is sure the EFSF will have a full approval by the EU summit at the end of next week

The common currency has also been supported by Eurozone Industrial production that rose 1.2% in August from 1.1% in July which translates to a solid annual print of 5.3%. This comes as a surprise as German industrial production, which heavily influences Eurozone results, declined 1% in August. Instead, the growth was largely driven by Portugal, Ireland and Italy.

The optimism was also underpinned by the president of European Commission Jose Barroso who will present a comprehensive response to the crisis to the EU parliament later today.

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In the UK, Claimant Count declined to 17.5K in September from 19.1K in August and the Claimant rate rose to 5% from 4.9%. The most significant disappointment came when the unemployment rate that rose to 8.1% in August from 7.9% in July which is the highest unemployment since 1994. However, the Sterling has ignored this worrying data and rallied 200 points to a high of 1.5783.

The NY session will start at 8:30 am ET with Canadian New Housing Price index seen at 0.1% in August. There are no US data but markets could be volatile as we have NY afternoon filled with central bank speakers. At 1:20 FOMC member Richard Fisher delivers a speech about FED's operations, followed by FOMC member Charles Plosser at 1:30 pm ET.

FOMC minutes due at 2pm and are likely to be dovish and could provide insights into the possibility of further easing measures. However, keep in mind last week's payrolls number that was above expectations.

Volatility could also be stirred up during J. C. Trichet's speech in London at 2:30 pm.


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