The release of disappointing jobs data in the US sparked a risk off trading session on Friday which saw the USD reach a two year high against the Euro and increase the most overall since September of 2011

The world’s largest economy added a net 80,000 nonfarm payrolls in June, below market forecasts for a gain of around 90,000 -100,000. April figures were revised to 68,000 from 77,000 nonfarm payrolls, whilst May’s numbers were revised to 77,000 from 69,000. Private employment which excludes government agencies increased 84,000 in June, the weakest growth seen in 10 months.

Speculation increased that the Federal Reserve may initiate a 3rd round of debt purchases under quantitative easing which would normally send stocks higher. However with no monetary decision in the US until at least Aug 1st, it was monetary policy decisions outside of the U.S. sent investors racing to the dollar and selling stocks worldwide.

Having seen the European Central Bank cut its benchmark interest rate 25 basis points to 0.75% and interest rate cuts in China; the USD gained 3.1% to $1.2291 against the Euro, from $1.2667 on June 29th. The rally was its largest Sept. 9th and it reached $1.2260, the strongest level since July 2010 as concerns increased that the ECB cut in interest rates to a record low will not be enough to halt the Eurozone’s debt crisis. The EUR fell 3.1% to 97.89 yen in the pair’s largest weekly drop since April 6th.

The commodity markets also suffered on the advance of the USD. Gold often trades inversely to the US and acts as the traditional hedge to the US Dollar – Gold closed Friday down 1.59% whilst Silver was down 2.18%.

In a quiet day tomorrow on the economic front – look to Chinese PPI and CPI released overnight to give a sign as to how European markets will open. Swiss unemployment and German Trade Balance should be looked at on Monday too.

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