The dollar has retreated in comparison to its major competitors on Friday, after the release of the U.S. employment situation for August. The smaller than expected increase in non-farm payrolls and the unexpected drop in the unemployment rate disappointed investors. However, Thursday's European Central Bank announcement of a new bond buying program continued to drive the markets.
Employment in the U.S. rose by much less than expected in the month of August, according to a report released by the Labor Department on Friday, although the report also showed an unexpected drop by the unemployment rate.
The report showed that employment increased by 96,000 jobs in August following a downwardly revised increase of 141,000 jobs in July. Economists had expected an increase of about 125,000 jobs compared to the addition of 163,000 jobs originally reported for the previous month.
Despite the weaker than expected job growth, the unemployment rate dropped to 8.1 percent in August from 8.3 in July amid a notable decrease in the size of the workforce. The unemployment rate had been expected to come in unchanged.
The International Monetary Fund is ready to work with the European Central Bank in the effective implementation of its new crisis-fighting measures, IMF Managing Director Christine Lagarde said on Thursday.
Welcoming the ECB decision, she said "the IMF stands ready to cooperate within our frameworks." "We see the ECB's action as an important step toward strengthening stability and growth in the Euro Area," she added.
The dollar added to its weakness from the previous 2 sessions against the Euro on Friday and reached over a 3-month low of $1.2806.
German industrial production recovered unexpectedly in July suggesting that the largest euro-area economy is weathering the impact of the debt crisis.
Industrial production expanded 1.3 percent in July from a month ago, the Federal Ministry of Economy and Technology said Friday. The increase follows June's revised 0.4 percent fall and came in contrast to a flat reading forecast by economists.
German exports bounced back unexpectedly in July, despite the debt crisis significantly disrupting trading activities across Europe, in part due to poor demand. Imports also recorded a surprise recovery, reflecting the still-strong private consumption in the economy.
Exports increased 0.5 percent month-on-month in July on a calendar and seasonally adjusted basis, the Federal Statistical Office said Friday. This was in contrast to economists' prediction of a 0.5 percent decline and comes after a 1.4 percent drop in June.
Imports gained 0.9 percent following a 2.9 percent fall in the previous month. The outcome defied expectations of a 0.3 percent fall.
The foreign trade balance showed a surplus of EUR 16.9 billion in July, slightly less than EUR 18 billion in June. In July 2011, the surplus was EUR 10.4 billion. Economists had forecast a surplus of EUR 15.3 billion.
The French trade deficit narrowed more than expected in July due to a fall in imports from the prior month, data released by the Directorate General of Customs and Excise showed Friday. The deficit plunged to EUR 4.27 billion in July from EUR 6.06 billion in June. The deficit was forecast to fall to EUR 5.85 billion in July.
The buck also extended its recent weakness against the pound sterling on Friday and dropped to $1.6033, its lowest level since the middle of May.
U.K. industrial production in July expanded at the fastest pace in 25 years as activity picked up from June's extra-holiday driven weakness. The July's rebound has raised hopes of better growth prospects in the third quarter. Industrial output grew 2.9 percent month-on-month, reversing June's 2.4 percent fall. The increase was the biggest since February 1987, and exceeded the 1.5 percent rise forecast by economists.
U.K. output price inflation accelerated more than expected to 2.2 percent annually in August from 1.8 percent in July, the Office for National Statistics said Friday. The annual rate was forecast to rise to 1.9 percent.
Output prices climbed 0.5 percent month-on-month, which was bigger than the 0.1 percent increase in July and 0.2 percent rise forecast by economists.
The Japanese government is most likely to run out of cash by the end of November, reports said Friday, citing remarks by Finance Minister Jun Azumi. Azumi said the Parliament should find a consensus and pass a debt-issuance bill, which is needed to fund a large part of the government's budget for the current fiscal.
The government on Friday approved a contingency plan, delaying JPY 5 trillion worth of budget spending. The spending plan is likely to be delayed further if the political impasse over the bond bill continues, the Minister was quoted as saying. This will have unfavorable impact on the economy, he added.
The greenback had risen to a high of Y79.026 versus the Japanese Yen on Thursday, but sank to Y78.008 on Friday.
Japan's leading economic index declined for a fourth consecutive month in July, preliminary data released by the Cabinet Office showed Friday. The leading index, which is designed to measure the direction of the economy in the months ahead, fell to 91.8 in July from 93.2 in June. Economists were looking for decline to 91.6.
by RTT Staff Writer
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