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The euro suffered its biggest percentage loss in a day yesterday since August with poor data and Jean-Claude Trichet that was less hawkish than had been expected, signaling that a rate rise in Europe was unlikely next month.

Risky assets were also helped lower by a second bout of poor jobs numbers as US Initial Jobless Claims, the number of people newly applying for job benefits in the States rose by 474k last week. This was massively higher than expected and combined with the poor ADP number yesterday caused market participants to ditch anything risky. Equities were down across the globe and even commodities, normal havens in this atmosphere, lost ground with oil down 8.3% at one point.

It’s clear from this that the market is looking for a poor Non-Farm figure this afternoon and a further deterioration in assets like the euro. Market expectations are for a figure of around 185k, which in itself is a poor number. Anything sub 150k and we will see similar pressure as we saw yesterday afternoon.

Sterling has been a beneficiary of this move from the euro as it bounced from lows of 1.1075 in GBPEUR up to current prices around the 1.1250 mark causing sighs of relief around the country. Of course GBP is by no means out of the woods and the poor services data has shown that the UK economy is still fighting significant headwinds at the moment and the prospect for interest rate increases are dwindling fast.

The services sector of course makes up a huge part of the UK economy and while it is still growing, a figure above 50 denotes expansion, this growth is starting to slow (54.3 vs. 57.0 previously). This is a concern in the short term however the we believe a bounce back is due from the effects of a late Easter, the Royal wedding and the recent good weather.

Sterling could come under pressure today on inflation data due this morning with producer prices likely remaining above 5% although down from previous levels. Commodity prices are still high on a long-term scale and this will affecting people at the factory gate. The number is due at 09.30.

Have a good weekend.

Latest exchange rates at time of writing