Euro steady, scope for gains on US jobs data
The Euro is steady after the ECB and BoE kept interest rates on hold with market sentiments reassured by ECB President Mario Draghi’s statement on Thursday that it has a “fully effective backstop mechanism in place” to buy the bonds of euro zone states.
However, the Spanish finance minister surprised the market by stating that “Spain does not need a bailout at all, and is a competitive and sustainable country”, shortly after Madrid met a key bond sale target by raising nearly 4 billion euros at interest rates that were mostly lower – proving that it can still tap the markets for financing. However, October will still be a ‘test of fire’ for the Spanish government as the country faces payments on its sovereign debt of 30 billion euros. Investors are still waiting to know what decision the Spanish government will finally take over a possible request for help so that the ECB, in the secondary market, and the European rescue funds, in the primary, can lower its elevated financing costs.
The tougher rules and tighter credit policies has thwarted the UK housing market. Halifax fuelled fears about the state of the housing market yesterday as the nation’s biggest mortgage lender reported a third monthly fall in house prices. The 0.4 per cent decline in property prices in September replicates what the Nationwide’s index found earlier this week. Year-on-year prices are down, with the average property price falling to £159,486 in September, a 1.2 per cent drop on the same month in 2011. The recession and continuing difficulties securing mortgages, despite the Bank of England’s £80bn funding for lending scheme, seems to lie at the heart of the moribund UK property market.
On the FX market, the GBP/USD is trading at a range of 1.6172-1.6199. The dollar seems to be losing against the eur with EUR/USD trading at a range of 1.2966-1.3023. The main market mover of the day is likely to be a monthly U.S. payrolls report due at 01:30 pm British time. Recent indicators have suggested the world’s largest economy is picking up, but investors are looking for firm evidence.
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