Euro back near multi-year low after US jobs data; German and eurozone figures next week crucial

Euro notes — With a 2% slide euro will retest the 26 January 11-year low vs dollar. REUTERS

The euro has fallen against the dollar as US non-farm payroll data came dollar-positive. With the eurozone GDP data due next week unlikely to show an improved picture from the third quarter, the common currency has more risks on the downside.

The EUR/USD closed on Friday 1.45% down at 1.1319 and the 11-year low of 1.1097 touched on 26 January is now less than a 2% slide away.

Inflation as well as fourth quarter GDP data are the main releases from Germany next week and from the eurozone it is only the growth data.

Expectations are for Germany to fall to deflation in January as the year-on-year German CPI rate is forecast to fall to -0.3% from 0.2% in December.

Fourth quarter GDP data for Germany and the eurozone have less support from the base. That is, in the last two quarters, the GDP growth rate prints were aided by lower figures in the same period in the previous year but this time a higher Q4-2013 number will adversely affect the Q4-2014 rate.

The market consensus is for the year-on-year German expansion rate to fall to 1% from 1.2% and that of the eurozone to stay unchanged at 0.8%.

The US jobs report for January showed that non-farm payroll addition in the month was 257,000, down from 329,000 in December but higher than the market consensus of 234,000.

The fact that the December number saw a sharp revision from the previous 252,000 added to the positive impact, ignoring the unemployment rate that came at 5.7% when analysts were expecting a repeat of the December rate of 5.6%.

Also, the average hourly earnings increased 0.5%, reversing the 0.2% fall in December and beating expectations of a 0.3% growth.

The USD index rose to 94.36 from 93.60 following the data as the greenback strengthened across the board.

Data next week from the US include January retail sales and the Reuters/Michigan consumer sentiment index for February. Consensus for retail sales is the rate of decline to ease to 0.5% from 0.9% in December. The Reuters index is forecast at 98.1, the same as January's.

In addition, there are two Fed speakers next week: the Richmond Fed President Jeffrey Lacker and Dallas Fed President Richard Fischer. Lacker will speak on Tuesday and Fischer on Wednesday as well as Friday.