European session: market awaits US jobs data

The dollar held onto two days of gains versus the euro before a government report that economists said will show U.S. employers added the most jobs in three months in January.
U.S. nonfarm payrolls probably increased by 146,000 in January after climbing by 103,000 the previous month, as jobless rate rose to 9.5% from 9.4$, survey showed.
The Institute for Supply Management’s index of U.S. non- manufacturing businesses released yesterday showed service industries expanded in January at the fastest pace since August 2005, indicating the economic recovery is broadening.
“The U.S. economy is picking up and starting to show some pretty consistent signs of recovery, which could spill over to jobs,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. Federal Reserve Chairman Ben S. Bernanke “boils it all down to employment, so a strong employment report would be quite important for the dollar.”
The euro headed for a weekly loss against most of its major counterparts as European Union leaders prepared to meet today in Brussels to discuss the region’s debt crisis and traders cut bets on the outlook for interest-rate increases.
The euro headed for a second weekly decline versus the yen before EU leaders meet today to try to narrow differences on a strategy to end the region’s financial crisis. Germany on Feb. 2 ruled out allowing the region’s bailout facility to fund bond buybacks from debt-strapped governments.
“The euro is a sell on the rally at this stage,” said Alex Sinton, a senior dealer in Auckland at ANZ National Bank Ltd. “The market’s got to be wary overall because the economic and debt situation behind the euro is still poor.”
European Central Bank President Jean-Claude Trichet said yesterday that inflation risks are “broadly balanced,” dimming the prospect of an increase in rates. Australia’s currency strengthened to a one-month high versus the greenback after the central bank lifted its growth and inflation forecasts in a quarterly report today.

EUR/USD: traded within $1.3615-$1.3640 range.

The main event comes with the US labor market data at 1330GMT. Non-farm payrolls are expected to increase by 136,000 in January following the 103,000 gain in December, with annual revisions due with this month's data. Private payrolls are seen up 165,000, while the unemployment rate is forecast to increase to 9.5% after the 0.4 point drop in December to 9.4%. Hourly earnings are expected to post a 0.2% increase, while the average workweek is forecast to remain unchanged at 34.3 hours in January.