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The two main themes of last week’s markets continued to play out on Friday with the dollar on the backfoot and the Middle East once again starting to kick off.

Friday’s jobs numbers were disappointing for the dollar in so much as, while it was just below consensus thoughts, they were less than would structurally effect GDP positively. The unemployment level dipped once again but also it cannot be really taken as a positive because indicators show that this is more as a result of people leaving the workforce as they are unable to find a job as opposed to becoming employed. The dollar initially lost ground, breaching the 1.40 level in EURUSD for the first time in 4 months. It has slid back a tad after a ratings downgrade for Greece by Moody’s which is interesting given that Greece has already had  bailout money from the EU/IMF but economic and political reforms are just not cutting the mustard with traders yet.

The Irish coalition government was formed between Fine Gael and the Irish Labour party and it seems that their first order of business is renegotiating the EU/IMF bailout.  The market is not too happy however and has pushed Irish 10 year bond yields to a Euro area  record of 9.477% on this news and we expect the yields on other peripheral countries’ debt to increase as we get closer to the EU summit on Friday. This should limit further euro gains in the short term although according to new figures from IMM the amount of people who are speculating on further euro strength is at a 3 year high.

The Libyan situation is still rumbling on with Gaddafi making counterattacks against revolutionaries in the west. Oil has also increased after there were further noises from Saudi Arabia that protests and marches are likely and journalists’ movements are being restricted. As has been proved in previous weeks however, most reports cannot be trusted implicitly but give a sense of the mood in the region.

There is no data today and in fact the pound is quiet until the Bank of England meeting on Thursday.

Latest exchange rates at time of writing