Australian dollar heads for weekly loss after RBA cuts inflation forecast

Pound:
Sterling rose against the euro yesterday and recovered from a two-week low against the dollar, helped by the European Central Bank's surprise decision to cut interest rates, which supported riskier assets. The common currency had been volatile for most of the day on speculation that Greece's government was on the brink of collapse and a referendum on a bailout that is crucial for it to avoid default would likely be scrapped. Greece's announcement on Monday that it would hold a referendum on its latest bailout agreed last week spooked financial markets and led to a sell-off of riskier assets. Sterling rose to as high as 1.1663 from around 1.1620 before the rate decision. Earlier, the UK currency was barely changed after lower-than-expected UK services sector PMI data. The headline index fell to 51.3 in October from 52.9 a month earlier and well below a forecast of 52.0.
No major data due today.

Euro:
Greece's centre-right opposition has demanded Prime Minister George Papandreou resign, throwing into disarray plans for a unity government. Opposition leader Antonis Samaras also called for snap elections before leading his MPs in a dramatic walkout of parliament. Mr Papandreou's government faces a crucial confidence vote later. He earlier said that opposition support could mean dropping controversial plans for a referendum on an EU bailout. The developments in Athens have overshadowed a meeting of the G20 leading economic nations in Cannes, which continues for a second day on Friday. At the end of the first day, the French host, President Nicolas Sarkozy, said France and Germany had helped Greek politicians focus on what was at stake. President Obama said the summit's main task was to resolve the eurozone crisis. In a move that surprised some investors, the ECB cut rates by 25 basis points to 1.25% following the first governing council meeting to be chaired by Mario Draghi, the new ECB President.
 
Data 11.00: German Factory Orders m/m

Dollar:
The dollar held a two-day drop versus the euro before data forecast to show U.S. jobs growth slowed and the unemployment rate remained unchanged, supporting the case for the Federal Reserve to consider monetary easing. Europe’s common currency climbed versus the greenback yesterday, paring this week’s drop, after Greek Prime Minister George Papandreou signaled he won’t call for a referendum on a bailout plan. The dollar is currently trading at $1.3810 per euro this morning, after falling 0.6 percent to $1.3823 yesterday. It trimmed this week’s gain to 2.4 percent. U.S. payrolls expanded by 95,000 workers last month after a 103,000 increase in September, according to the median forecast of economists ahead of today’s data from the Labour Department. The jobless rate was 9.1 percent for a fourth consecutive month, the report may also show.
Data 12.30: Non-Farm Employment Change; Unemployment Rate.

General:
•    The Australian dollar fell, heading for the first weekly loss since September, after the Reserve Bank of Australia lowered forecasts for economic growth and inflation, spurring speculation it will cut interest rates again. The Aussie halted a two-day gain after the RBA said risks to its economic forecasts “continue to be tilted to the downside.”
•    Canada’s dollar rose for a second consecutive day after Greece signaled that it won’t hold a referendum on its financial rescue, encouraging demand for higher-yielding assets.
The Canadian currency advanced earlier versus its U.S. counterpart as the European Central Bank lowered its benchmark interest rate and Group of 20 leaders discussed a bigger role for the International Monetary Fund in the European debt crisis.

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