Aussie Shaken by Jobs, Gold Resilient Despite Margin Hikes

Aussie set for further losses as unemployment rises, focus remains on Euro as French banks give reason for concern, sterling under pressure over growth fears, while gold continues to surge despite 22% hike in margin requirements. Ashraf's Premium analysis correctly predicted that Aussie payrolls would disappoint (see technical rationale & FX implications in last night's piece) below.

The Australian dollar's recent slump has been noticeable not only for its speed but a little surprising given its usually positive link to gold. However the slump in equities and copper prices is feeding into a downward spiral as normal risk currencies get caught up in the equity market sell-off.

This mornings Australian unemployment data for July could well feed into this unwind in long Australian dollar positions, after seeing full-time employment drop 22.2k in July, undoing half of June's jump, while unemployment increased from 4.9% to 5.1%. This disappointing employment report suggests that any move in interest rates is not likely to be higher, but lower in the short to medium term.

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EUR continues to remain in focus after the speculation surrounding Frances triple A rating as well as the health of the French banking sector. The European Central Bank continues to buy Spanish and Italian bonds pushing the 10 year yields lower, but still remaining stubbornly above 5%. The fact is the ECB will have to buy an awful lot more bonds to push yields to a more sustainable level, and there is no guarantee that Italy will be able to implement the austerity measures required, given unease among union leaders at what they see as the abandonment of Italys fiscal sovereignty. Italian finance minister Tremonti is also expected to unveil a new austerity budget in the face of some opposition from unions.

GBP slipped back over fears about the outlook for Q3 growth in the wake of yesterdays inflation report and the after-effects this week s riots will have on the UK economy. If economists were concerned about the effect the Royal Wedding had on the growth outlook in Q2, what they will make of this weeks events is anyones guess.

Gold prices have continued their upward march hitting new all time highs against not only the US dollar but also the euro and the pound, touching $1,800.

In the US later today July trade balance numbers are due out as are weekly jobless claims and it is unlikely that they will surprise sufficiently enough to change overall sentiment unduly