EUR/USD Drops on Strong U.S. Nonfarm Payrolls

Encouraging U.S. consumer confidence report and improvements in the jobs market pushed the greenback higher against the euro. Data from the Labor Department showed that hiring increased by 171k workers after a 148k gain in September.

The Conference Board’s Consumer Confidence Index for October has come in at its most positive value for almost five (Feb 08) at 72.2, up from 68.4 the previous month. The Institute for Supply Management’s U.S. factory index rose to 51.7 in October from 51.5 a month earlier. The acceleration in spending may help the world’s largest economy overcome a slowdown in the domestic market.

Weak economic numbers have been hurting the euro lately. In addition, the latest data showed that contraction in the peripheral countries poses a big threat to the rest of the European Union which is in an absolute mess right now. It seems that investors who have been giving the Europeans much more slack than they deserve, are running out of patience.

The Greek government is in desperate need for its next bailout tranche in order to remain afloat but opposing voices from some lawmakers make negative impact on the markets. Although the Portuguese government has managed to get a further austerity budget approved by parliament, the budget still faces a final vote on 27th November. Uncertainty about if and when Spain will seek a bailout is another negative element for the markets.

This week the markets’ focus will be on the US Presidential election. A win by Mitt Romney will be viewed as positive for USD, as he is against the idea of keeping on the Fed Chairman Ben Bernanke, who has been continuing to ease monetary policy over the last several years.

The latest data released by the Commodity Futures Trading Commission showed speculative currency traders on the Chicago Mercantile Exchange decreased their open short USD position by another 61% this week to reach a net of $2.0 billion and added another 5% to their open short EUR position to reach a net of $9.4  billion. Commitment of Traders report data also showed that speculative traders increased their open short JPY position by 50% and increased their open long AUD position by 16% from a week earlier.