EUR/usd

As it often happens in our days, Friday's U.S. labor report contained rather contradictory data. On the one hand, the number of household employees continues to grow under unprecedented rate, having increased by over 278 000. The total number of payrolls almost met the analyst forecasts, reaching 120K against the expected 126K. In addition, data for the previous two months were revised: they went up by over 70K. But there's no point to be overexcited about falling of the unemployment rate from 9.0% to 8.6% since only one-third of it is due to the employment growth, and two-thirds is caused by labor force cuts (working contingent decreased by 478K). Because of such ambiguity of the report it took some time for the markets to consider it. American exchanges showed about a 1.2% increase an hour after their opening, but by the end of the trading day they went back to the opening levels. The Forex market, as usual, proved to be faster. The euro growth by 30 points in the first minute quickly changed into the selloff of the single currency. Over the next four hours it went down by almost two big figures from 1.3545 to 1.3360. The weekend news from Europe turned out to be really encouraging as it spurred the demand for risk in Asia. The Mario Monti Government announced about the measures aimed at saving 30 billion euros. They include tax increases and enforcing of the higher retirement age. The markets should have welcomed it, but they remain cautious because of the Greek bitter experience in taking economy measures of the kind. This week the EU summit will be also held. It will be devoted to negotiating a closer integration of the EU countries and is likely to have a great impact on the euro.

GBP/USD

Just like the euro the sterling got a hard blow after the U.S.  labour market data release. The falling of the pound stopped at 1.5575, where the pair found buying interest bringing it to 1.56 by now. When falling the pound got back to the levels from which it went up on coordinated actions from the major world CBs. Prospects for the British currency depend on what factors will outweigh: slowdown of the domestic economy which increases chances of a new recession or the use of the sterling as a means of the capital protection on a growing distrust to the euro. The article on the FT says that the corporate bond issuance in Britain has soared by more than 40% since the beginning of the year compared to the last year data, while sales of euro-nominated bonds have fallen to six-year lows. We are still expecting the growth of the pound before the end of the year after easing conditions on dollar swaps. Such sentiments among investors will support the demand for the sterling which will hardly be appreciated by Governor of the Bank of England.

USD/JPY

As has already been mentioned, the dollar/yen continues its rising. Various positive factors for the stock market (good economic news from the U.S. and positive sentiments of European politicians) support buying of the pair showing us a series of growing lows and highs in the four-hour candlesticks. Now it is at 78, just as it was at the time of our last report, but the trend still remains upward. Perhaps we will finally witness the reversal of the pair soon, still let's wait a bit as we have already observed many of such false reversals. Still, the coming New Year and favourable retail sales data after Thanksgiving Day give us hope that the stock markets will continue growing till the end of the year on the portfolio rebalancing after a significant growth of the bond market in the U.S. and Japan during the most part of the year.

AUD/USD

aussie is locked in the corridor 1.02-1.03. Despite our forecast the advance in stock markets haven't managed to overweight the expectations of the rate cut this week (late at night today). As has been mentioned earlier, it is very likely that the official rate will be reduced by a quarter of the percentage point to 4.25% on the inflation slowdown. But the tone of the accompanying commentary is unlikely to be as soft as we expected earlier. So after the consolidation there is a great probability that we will observe continuing of the growth to 1.04 level by the end of the week, and  by 1.05 by the end of the year.