Aussie, Kwi dollars drop for third day

Pound:
Sterling rose to its highest in nearly 16 months versus the euro yesterday on worries over euro zone sovereign funding pressures and after data showed a pick-up in UK service sector activity. But the UK economy's uncertain prospects dragged the pound down against a broadly firmer dollar, which was boosted by strong U.S. jobs data. UK service sector PMI unexpectedly rose to 54.0, its highest since July. This added to the view that the UK economy will still outperform the euro zone and encouraged those seeking alternatives to the euro to buy sterling. Sterling climbed to 1.2135, its highest level since September 2010, extending Wednesday's gains when it reached 1.2070. If UK economic data continues to show improvement, this will dampen expectations for further quantitative easing by the Bank of England, also helping the pound. Economists polled by Reuters still expect the BoE to expand its asset purchasing programme though by less than they forecast in a poll in December.

No major data due today.

Euro:
The euro fell to a 16 month low versus the dollar on speculation declining consumer confidence and spending will make it harder for European leaders to contain the region’s sovereign-debt crisis. The 17-nation currency was 0.2 percent from its weakest level in 11 years against the yen as Spain and Italy prepare to sell debt next week after France’s borrowing costs rose at an auction yesterday. Europe’s common currency fell to $1.2764, its lowest level since September 2010, before trading at $1.2785 this morning, little changed from yesterday’s close in New York. The euro has dropped 1.5 percent against the dollar since Dec. 30, set for a fifth straight week of declines, the longest stretch since February 2010. Retail sales in the region dropped 0.4 percent in November following a 0.1 percent advance the previous month, a separate survey shows before the European Union’s statistics office in Luxembourg releases the data.
Data 10.00: Retail Sales m/m; 11.00: German Factory Orders m/m.

Dollar:
The US dollar had a very bullish day yesterday, following a better than expected ADP Non-Farm Payrolls figure and Unemployment Claims report. Gains were made against the euro, British pound and Japanese yen. Against sterling, the dollar climbed to 1.5473 from around 1.5600 earlier in the day. The ADP figure came in at 325K, well above the forecasted 176K. The ADP report is known as an important predictor of today's Non-Farm Payrolls (NFP) figure. The NFP is widely considered the most important global economic indicator, and typically generates heavy market movements. The NFP will measure the number of non-farm jobs added to US payrolls during the month of December. Analysts are predicting the number to come in at around 152K, which if true, would signal a sizeable increase over November's figure.
Data 13.30: Non-Farm Employment Change, Unemployment Rate.

General:
•    The Australian and New Zealand dollars declined for a third day on concern Europe’s debt crisis is deepening, sapping demand for higher-yielding assets.The Aussie fell against 15 of its 16 major counterparts before European countries, including Germany, Greece, Spain and Italy, sell bonds next week. New Zealand’s dollar was set for a weekly advance against the majority of its most-traded peers before a U.S. report that economists say will show hiring increased last month in the world’s largest economy.

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