Euro climbs on ECB bond buying plans

- US dollar weakens on heightened expectations of more stimulus measures

Friday saw a clear indication that the markets have taken kindly to ECB President Mario Draghi’s bond buying initiative announced last Thursday. The result of the latest measures to help fight contagion within the euro region saw global stock markets rise on improved risk sentiment and the single currency spike higher against the US dollar. Over the week the euro was able to climb 1.9% against the greenback, peaking just above 1.2800. 

The British pound also got in on the action achieving its highest level against the dollar since May earlier this year. A strong performance from UK’s manufacturers helped buoy sentiment. The release of industrial production data, which includes mining and utilities statistics, saw a surge in output for the month of July, up 2.9%, representing its strongest performance since 1987. Although it could be argued that the numbers were actually distorted by the poor showing for the month of June as a result of the Queen’s Jubilee celebrations and the additional public holiday. Manufacturing production climbed 3.2% during the same period. 

Friday afternoon trading was dominated by the release of the all important US Non-farm employment data for the month of August. US companies had managed to add another 96K jobs, although this was way below what had been hoped for. The US jobless rate did decline to 8.1% from 8.3% as the total labor participation rate fell at a faster rate than the number of job losses. 

The market mood swung immediately towards further additional stimulus measures being ever more likely as Federal Reserve Chairman Ben Bernanke makes his address following this week’s FOMC rate setting meeting due to conclude on the 13th September.