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Eyes Turn to Eurozone Summit

Eyes Turn to Eurozone Summit

The US Non-Farm Payroll report surprised the market as unemployment in the U.S. fell to its lowest level in 4 years. Confirmation of 114k new jobs created last month was close to forecast and it ended up being an unexpected fall in the unemployment rate that stole the headlines. Last month’s print of 8.1% was expected to rise to 8.2%, but unemployment in the world’s largest economy actually dropped to 7.8% – a 4-year low. This is a positive sign as businesses have been hesitant to hire due to concerns that the US recovery could take a hit from a tightening of the federal budget next year and the slowdown in the global economy.

Germany’s positive start to Q3 was short lived as August’s industrial orders were far worse than expected, falling by 1.3% month-on-month with July’s reported gain of 0.5% revised down to 0.3%. The main deterioration resulted from weak domestic demand although demand from abroad remained unchanged. Whilst this data is clearly disappointing, there is no suggestion Germany will slip into recession any time soon.

Today’s market is closely eying the Eurozone finance ministers meeting at Luxembourg where they will officially approve the permanent rescue fund ESM and discuss the recent developments in the Eurozone debt crisis, mainly the situation in Spain and Greece. Finance ministers of all 24 EU nations will gather on Tuesday. t is expected that Spain will be the first EU member state to apply for ESM funds, but it most probably won’t happen just yet, as Spanish bond yields have been declining recently, while harsh budget cuts spurred a strong opposition among Spanish citizen.

Consolidation from 1.6309 is still in progress but last Friday’s price action is a negative for continuation for the moment and a deeper decline might be seen below 1.6060, but downside should be contained above 1.5912 support and bring another rally. A sustained break of 1.6300 will have larger bullish implications and would pave the way to 1.6618/6746 resistance zone next.

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