Worse than expected US non farm payrolls disappointed the markets last week

Risk aversion on talks that Italy may be next on sovereign debt radar.

Non-farm payrolls recap

After setting the stage for a positive jobs report from the US following a robust ADP report on Thursday, the woeful reading that was the outcome sent panic and risk aversion through the markets. The reading of just 18,000 against expectations of 105,000 along with an uptick in the unemployment rate to 9.2% plus May and April revisions showing subtractions of 44,000 has really put the QE3 debate in the minds of the market. This report confirms that the US is indeed in one of the weakest recoveries on record.

EUR/USD

Range: 1.4182 – 1.4300

Support: 1.4150

Resistance: 1.4300

The Euro started the week lower once again, as the market looks for safe haven options with the US dollar and CHF benefiting against the single currency. There is widespread talk that Italy will be next in line to go cup in hand for a bailout package, with Italian equity markets on the slide, particularly the banking sector. Italy has the highest sovereign debt ratio relative to its GDP and is Europe’s third largest economy. ECB president Herman Van Rompuy has called an ‘emergency meeting’ this morning reflecting concerns on Italy. I can’t see too much good news from Europe this week, with the European Bank stress test results to be announced towards the end of the week.

GBP/USD

Range: 1.5965 – 1.6039

Support: 1.5900

Resistance 1.6100

Sterling is still trading with an offered tone, with only the demise of EUR/GBP keeping the Queens currency in second place in the ugly currency contest in what is looking very much like a risk averse market. The main event this week for sterling will be the CPI release tomorrow which is expected to print 4.5%. The labour market data will also get some interest on Wednesday, with the market looking for an increase to the claimant count of 15,000.

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