LONDON—Currency markets were largely flat Friday ahead of the release of U.S. nonfarm payrolls numbers, but the euro was still flying high after European Central Bank President Jean-Claude Trichet on Thursday signaled an impending rate rise in the euro zone.
The euro was recently trading at $1.3972 compared with $1.3960 late Thursday in New York. The dollar was at 82.61 yen, compared with 82.36 yen, while the euro was at 115.44 yen, compared with 115.07 yen. Meanwhile, the pound was trading at $1.6282 against the dollar, compared with $1.6269.
The European currency surged across the board as market participants frantically bought the single currency after Mr. Trichet said the ECB is in a mode of "strong vigilance," which traders took as a greenlight for an interest rate rise in April.
"[Mr.] Trichet surprised the market massively," said Commerzbank AG in a note to clients. "The euro's rate advantage against the dollar will widen and the ECB will regain the confidence it had squandered during the debt crisis in 2010." The euro added 0.9% against the dollar immediately after Mr. Trichet's comments, jumping from $1.3851 to $1.3976.
The single currency also clocked up hefty gains against the Japanese yen Friday, and the pair traded at its highest level since Oct. 7 at 115.43 yen, while it traded at a one-month high against sterling in the early session at £0.8566.
All eyes are on the U.S. nonfarm payroll number, due at 1330 GMT, with the market expecting the U.S. economy to have added 200,000 jobs in February. Investors were optimistic about the state of the U.S. jobs market after the weekly unemployment claims indicator Thursday showed that claims fell to 368,000 in the week ending Feb. 26, from 388,000 the week before.
There are no significant data releases during London hours, but euro-zone central bankers will be jostling for attention. Axel Weber, Mario Draghi, Christian Noyer, Lorenzo Bini-Smaghi and Athanasios Orphanides will be speaking at a conference in France, where the European Union's Olli Rehn is also due to speak, as is PBOC Governor Zhou Xiaochuan, French Finance Minister Christine Lagarde, Bank of Korea Governor Choongsoo Kim and Bank of Japan Governor Masaaki Shirakawa.
"I don't think we can be further shocked by the speakers with regards to ECB policy," said Jane Foley, a currency strategist at Rabobank in London. "The market is poised for a strong U.S. unemployment reading, but rate differentials will likely continue to favor the euro in the medium term."
The dollar was steady arcoss the board ahead of the data release, and although a strong print could boost the dollar, the market sees any dollar bounce temporary for now.
"The yield advantage of the euro against the dollar has jumped to its highest level since December 2008. If the EU summits over this month can deliver some level of agreement, then the risk is that the euro keeps rising. A strong payrolls report may only provide a dip to buy the single currency," Royal Bank of Scotland Group PLC said in a research note.
Elsewhere, Swiss National Bank Vice President Thomas Jordan said in an interview that Switzerland's record low interest rates aren't sustainable in the long term. The Swiss franc ticked to the day's high against the euro and the dollar, but drifted back after the knee-jerk reaction died down.
The pound was clawing back losses against the dollar it clocked up in the early session, when the Halifax house price index showed that prices fell 0.9% in February, against a consensus of a 0.4% fall.
In emerging markets, the Russian ruble powered to a new 26-month high against the dollar in Friday's session, advancing for the third straight day after the central bank widened the currency's trading corridor earlier in the week.
